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Joint-search theory: new opportunities and new frictions

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  • Bulent Guler
  • Fatih Guvenen
  • Giovanni L. Violante

Abstract

Search theory routinely assumes that decisions about the acceptance/rejection of job offers (and, hence, about labor market movements between jobs or across employment states) are made by individuals acting in isolation. In reality, the vast majority of workers are somewhat tied to their partners - in couples and families - and decisions are made jointly. This paper studies, from a theoretical viewpoint, the joint job-search and location problem of a household formed by a couple (e.g., husband and wife) who perfectly pools income. The objective of the exercise, very much in the spirit of standard search theory, is to characterize the reservation wage behavior of the couple and compare it to the single-agent search model in order to understand the ramifications of partnerships for individual labor market outcomes and wage dynamics. We focus on two main cases. First, when couples are risk averse and pool income, joint search yields new opportunities - similar to on-the-job search - relative to the single-agent search. Second, when the two spouses in a couple face job offers from multiple locations and a cost of living apart, joint search features new frictions and can lead to significantly worse outcomes than single-agent search.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Minneapolis in its series Staff Report with number 426.

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Date of creation: 2009
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Handle: RePEc:fip:fedmsr:426

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Keywords: Search theory ; Unemployment ; Wages;

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Citations

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Cited by:
  1. Jan Eeckhout, 2012. "Matching Information," 2012 Meeting Papers 835, Society for Economic Dynamics.
  2. Marcassa, Stefania, 2012. "Unemployment Duration of Spouses: Evidence From France," CEPREMAP Working Papers (Docweb) 1204, CEPREMAP.
  3. Mankart, Jochen & Oikonomou, Rigas, 2012. "Household Search and the Aggregate Labor Market," Economics Working Paper Series 1225, University of St. Gallen, School of Economics and Political Science.
  4. Ek, Susanne & Holmlund, Bertil, 2010. "Family Job Search, Wage Bargaining, and Optimal Unemployment Insurance," Working Paper Series, Center for Labor Studies 2010:1, Uppsala University, Department of Economics.
  5. Junge, Martin & Munk, Martin D. & Poutvaara, Panu, 2014. "International Migration of Couples," IZA Discussion Papers 8352, Institute for the Study of Labor (IZA).
  6. Bulent Guler, 2013. "Dual Income Couples and Interstate Migration," 2013 Meeting Papers 898, Society for Economic Dynamics.
  7. Sekyu Choi, 2013. "On Households and Unemployment," 2013 Meeting Papers 992, Society for Economic Dynamics.
  8. Zhou, Jidong, 2011. "Multiproduct search," MPRA Paper 37139, University Library of Munich, Germany.
  9. Luca Flabbi and James Mabli, 2012. "Household Search or Individual Search: Does It Matter? Evidence from Lifetime Inequality Estimates," Working Papers gueconwpa~12-12-03, Georgetown University, Department of Economics.
  10. Zaharieva, Anna, 2013. "Social welfare and wage inequality in search equilibrium with personal contacts," Labour Economics, Elsevier, vol. 23(C), pages 107-121.
  11. Greg Kaplan & Sam Schulhofer-Wohl, 2012. "Understanding the long-run decline in interstate migration," Working Papers 697, Federal Reserve Bank of Minneapolis.
  12. Andrew Shephard, 2011. "Equilibrium Search and Tax Credit Reform," Working Papers 1336, Princeton University, Department of Economics, Center for Economic Policy Studies..
  13. Rodolfo E. Manuelli & Adrian Peralta-Alva, 2011. ""Frictions in financial and labor markets": a summary of the 35th Annual Economic Policy Conference," Review, Federal Reserve Bank of St. Louis, issue July, pages 273-292.
  14. Willemijn Van Der Straaten & Jan Rouwendal, 2011. "Why are the commuting distances of power couples so short? An analysis of the location preferences of households," ERSA conference papers ersa10p816, European Regional Science Association.

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