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The Reservation Wage under CARA and Limited Borrowing

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  • Bauer, Christian

Abstract

A continuous-time sequential job search model with savings and CARA preferences is solved analytically without resorting to unlimited borrowing and real-valued consumption. I isolate the effects of limited borrowing and nonnegative consumption as well as risk-aversion on the reservation wage by using a system of ordinary differential equations.

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Bibliographic Info

Paper provided by University of Munich, Department of Economics in its series Discussion Papers in Economics with number 10291.

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Date of creation: 15 Mar 2009
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Handle: RePEc:lmu:muenec:10291

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Keywords: labor income risk; wealth-dependent reservation wage; borrowing limit;

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Cited by:
  1. S. Nuray Akin & Brennan Platt, 2012. "Running Out of Time: Limited Unemployment Benefits and Reservation Wages," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 15(2), pages 149-170, April.

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