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Lifetime Labor Supply in a Search Model of Unemployment

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  • Leon J.H. Bettendorf

    ()
    (OCFEB, Erasmus University Rotterdam)

  • D. Peter Broer

    ()
    (OCFEB, Erasmus University Rotterdam)

Abstract

This paper investigates the age-dependency of participation andunemployment by integrating job search with intertemporal optimizing behaviorof finitely-lived households. We find that search frictions and tax ratesdistort the decisions of older workers to a much larger extent than that ofyoung workers. This finding provides an explanation of the observed fall ofparticipation rates of elder workers as a result of the post-war increase intax rates and replacement rates. We show that the age pattern of searchunemployment does not match observed unemployment and we propose a new conceptof 'voluntary' unemployment that agrees well with observations.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 03-032/2.

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Date of creation: 09 Apr 2003
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Handle: RePEc:dgr:uvatin:20030032

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Keywords: search frictions; labor supply; life cycle; unemployment; retirement.;

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References

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  17. Shi, Shouyong & Wen, Quan, 1997. "Labor market search and capital accumulation: Some analytical results," Journal of Economic Dynamics and Control, Elsevier, vol. 21(10), pages 1747-1776, August.
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Cited by:
  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. Batyra, Anna & de la Croix, David & Pierrard, Olivier & Sneessens, Henri R., 2013. "Declining bargaining power of workers and the rise of early retirement in Europe," GIAM Working Papers 13-6, Galatasaray University Economic Research Center.
  3. Chéron, Arnaud & Hairault, Jean-Olivier & Langot, François, 2008. "Life-Cycle Equilibrium Unemployment," IZA Discussion Papers 3396, Institute for the Study of Labor (IZA).
  4. Jean-Olivier Hairault & Francois Langot & Arnaud Cheron, 2007. "Job creation and job destruction over the life cycle," 2007 Meeting Papers 431, Society for Economic Dynamics.

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