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Directed search over the life cycle

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Author Info

  • Guido Menzio

    ()

  • Irina A. Telykova

    ()

  • Ludo Visschers

    ()

Abstract

We develop a life-cycle model of the labor market in which different worker-firm matches have different quality and the assignment of the right workers to the right firms is time consuming because of search and learning frictions. The rate at which workers move between unemployment, employment and across different firms is endogenous because search is directed and, hence, workers can choose whether to seek low-wage jobs that are easy to find or high-wage jobs that are hard to find. We calibrate our theory using data on labor market transitions aggregated across workers of different ages. We validate our theory by showing that it correctly predicts the pattern of labor market transitions for workers of different ages. Finally, we use our theory to decompose the age profiles of transition rates, wages and productivity into the effects of age variation in work-life expectancy, human capital and match quality.

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Bibliographic Info

Paper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number we1210.

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Date of creation: Jan 2012
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Handle: RePEc:cte:werepe:we1210

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Keywords: Directed search; Labor reallocation; Lifecycle;

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References

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  1. Meghir, Costas & Pistaferri, Luigi, 2002. "Income Variance Dynamics and Heterogeneity," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3632, C.E.P.R. Discussion Papers.
  2. Guido Menzio & Shouyong Shi, 2009. "Block Recursive Equilibria for Stochastic Models of Search on the Job," NBER Working Papers 14907, National Bureau of Economic Research, Inc.
  3. Fatih Guvenen & Anthony Smith, 2010. "Inferring labor income risk from economic choices: an indirect inference approach," Staff Report, Federal Reserve Bank of Minneapolis 450, Federal Reserve Bank of Minneapolis.
  4. Low, Hamish & Meghir, Costas & Pistaferri, Luigi, 2008. "Wage Risk and Employment Risk over the Life Cycle," IZA Discussion Papers 3700, Institute for the Study of Labor (IZA).
  5. Fabien Postel-Vinay & Hélène Turon, 2006. "On-the-job Search, Productivity Shocks, and the Individual Earnings Process," The Centre for Market and Public Organisation, Department of Economics, University of Bristol, UK 06/141, Department of Economics, University of Bristol, UK.
  6. Manolis Galenianos & Philipp A. Kircher, 2005. "Directed Search with Multiple Job Applications," Bonn Econ Discussion Papers, University of Bonn, Germany bgse20_2005, University of Bonn, Germany.
  7. Guido Menzio & Shouyong Shi, 2010. "Directed Search on the Job, Heterogeneity, and Aggregate Fluctuations," Working Papers, University of Toronto, Department of Economics tecipa-390, University of Toronto, Department of Economics.
  8. Guido Menzio & Shouyong Shi, 2008. "Efficient Search on the Job and the Business Cycle," Working Papers, University of Toronto, Department of Economics tecipa-327, University of Toronto, Department of Economics.
  9. Gorry, Aspen, 2010. "Experience and Worker Flows," MPRA Paper 25298, University Library of Munich, Germany.
  10. Postel-Vinay & Robin, 2002. "Equilibrium wage dispersion with worker and employer heterogeneity," Working Papers, Institut National de la Recherche Agronomique, France 155908, Institut National de la Recherche Agronomique, France.
  11. 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, MIT Press, vol. 8(5), pages 1034-1076, 09.
  12. Chéron, Arnaud & Hairault, Jean-Olivier & Langot, François, 2011. "Life Cycle Equilibrium Unemployment," CEPREMAP Working Papers (Docweb), CEPREMAP 1103, CEPREMAP.
  13. Arnaud Chéron & Jean-Olivier Hairault & François Langot, 2011. "Age-Dependent Employment Protection," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers), HAL hal-00623282, HAL.
  14. Julen Esteban-Pretel & Junichi Fujimoto, 2011. "Life-Cycle Labor Search with Stochastic Match Quality," CIRJE F-Series, CIRJE, Faculty of Economics, University of Tokyo CIRJE-F-783, CIRJE, Faculty of Economics, University of Tokyo.
  15. Gadi Barlevy, 2008. "Identification of Search Models using Record Statistics," Review of Economic Studies, Oxford University Press, vol. 75(1), pages 29-64.
  16. Katharine G. Abraham & Robert Shimer, 2001. "Changes in Unemployment Duration and Labor Force Attachment," NBER Working Papers 8513, National Bureau of Economic Research, Inc.
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  1. Directed Search over the Life Cycle
    by Christian Zimmermann in NEP-DGE blog on 2012-01-20 22:54:28
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