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Life Cycle Equilibrium Unemployment

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Author Info

  • Chéron, Arnaud
  • Hairault, Jean-Olivier
  • Langot, François

Abstract

This paper extends the job creation-job destruction approach to the labor market to take into account a deterministic finite horizon. As hirings and separations depend on the time over which to recoup investment costs, the life-cycle setting implies age-differentiated labor market flows. Whereas the search effort of unemployed workers presents an age-decreasing profile, the age-dynamics of the separation rate can be either decreasing or increasing. Worker heterogeneity in the context of the undirected search implies an intergenerational externality, which is not eliminated by the Hosios condition. We show that age-specific policies are necessary to reach the first best allocation.

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Bibliographic Info

Paper provided by CEPREMAP in its series CEPREMAP Working Papers (Docweb) with number 1103.

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Length: 42 pages
Date of creation: Apr 2011
Date of revision:
Handle: RePEc:cpm:docweb:1103

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Keywords: search; matching; retirement; life cycle;

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References

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  1. Hairault, Jean-Olivier & Chéron, Arnaud & Langot, François, 2007. "Job Creation and Job Destruction over the Life Cycle: The Older Workers in the Spotlight," IZA Discussion Papers 2597, Institute for the Study of Labor (IZA).
  2. Robert E. Hall, 2005. "Employment Fluctuations with Equilibrium Wage Stickiness," American Economic Review, American Economic Association, vol. 95(1), pages 50-65, March.
  3. Maite Blázquez & Marcel Jansen, 2005. "Search, Mismatch and Unemployment," Labor and Demography 0510012, EconWPA.
  4. Sheshinski, Eytan, 1978. "A model of social security and retirement decisions," Journal of Public Economics, Elsevier, vol. 10(3), pages 337-360, December.
  5. Guido Menzio & Irina A. Telyukova & Ludo Visschers, 2012. "Directed Search over the Life Cycle," PIER Working Paper Archive 12-002, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  6. Michael Sattinger, 2003. "Overlapping Labour Markets," Discussion Papers 03-06, University at Albany, SUNY, Department of Economics.
  7. Hellerstein, Judith K & Neumark, David & Troske, Kenneth R, 1999. "Wages, Productivity, and Worker Characteristics: Evidence from Plant-Level Production Functions and Wage Equations," Journal of Labor Economics, University of Chicago Press, vol. 17(3), pages 409-46, July.
  8. Edward C. Prescott, 2003. "Why do Americans work so much more than Europeans?," Staff Report 321, Federal Reserve Bank of Minneapolis.
  9. Ljungqvist, Lars & Sargent, Thomas J., 1997. "The European Unemployment Dilemma," Working Paper Series 481, Research Institute of Industrial Economics.
  10. Mortensen, Dale T. & Pissarides, Christopher A., 1999. "New developments in models of search in the labor market," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 39, pages 2567-2627 Elsevier.
  11. Mortensen, Dale T & Pissarides, Christopher A, 1994. "Job Creation and Job Destruction in the Theory of Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 397-415, July.
  12. Hosios, Arthur J, 1990. "On the Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 57(2), pages 279-98, April.
  13. Bartel, Ann P & Sicherman, Nachum, 1993. "Technological Change and Retirement Decisions of Older Workers," Journal of Labor Economics, University of Chicago Press, vol. 11(1), pages 162-83, January.
  14. Chéron, Arnaud & Hairault, Jean-Olivier & Langot, François, 2008. "Age-Dependent Employment Protection," IZA Discussion Papers 3851, Institute for the Study of Labor (IZA).
  15. Richard Rogerson, 2006. "Understanding Differences in Hours Worked," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(3), pages 365-409, July.
  16. Steven J. Davis, 2001. "The Quality Distribution of Jobs and the Structure of Wages in Search Equilibrium," NBER Working Papers 8434, National Bureau of Economic Research, Inc.
  17. Albrecht, James & Navarro, Lucas & Vroman, Susan, 2010. "Efficiency in a search and matching model with endogenous participation," Economics Letters, Elsevier, vol. 106(1), pages 48-50, January.
  18. Heckman, James J, 1974. "Life Cycle Consumption and Labor Supply: An Explanation of the Relationship Between Income and Consumption Over the Life Cycle," American Economic Review, American Economic Association, vol. 64(1), pages 188-94, March.
  19. Arnaud CHÉRON & Jean-Olivier HAIRAULT & François LANGOT, 2009. "The Role of Institutions in Transatlantic Employment Differences: A Life-Cycle View," Annales d'Economie et de Statistique, ENSAE, issue 95-96, pages 121-138.
  20. Seater, John J., 1977. "A unified model of consumption, labor supply, and job search," Journal of Economic Theory, Elsevier, vol. 14(2), pages 349-372, April.
  21. Moen, Espen R, 1997. "Competitive Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 385-411, April.
  22. Pedro Portugal & Olivier Blanchard, 2001. "What Hides Behind an Unemployment Rate: Comparing Portuguese and U.S. Labor Markets," American Economic Review, American Economic Association, vol. 91(1), pages 187-207, March.
  23. Leon J.H. Bettendorf & D. Peter Broer, 2003. "Lifetime Labor Supply in a Search Model of Unemployment," Tinbergen Institute Discussion Papers 03-032/2, Tinbergen Institute.
  24. Jean-Olivier Hairault & Francois Langot & Thepthida Sopraseuth, 2010. "Distance to Retirement and Older Workers' Employment: The Case for Delaying the Retirement Age," Journal of the European Economic Association, MIT Press, vol. 8(5), pages 1034-1076, 09.
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