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Asset Accumulation and Short Term Employment

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  • Martin Browning
  • Thomas F. Crossley
  • Eric Smith

Abstract

If access to credit is limited (especially when young or unemployed) but ”bad” jobs are easy to come by, then job seekers might use short term employment in undesirable jobs as a way to finance consumption during subsequent unemployed search for a “good” job. In this paper we explore this idea in two ways. First, we document empirical patterns of short term employment and asset accumulation among job seekers. Second, we build a theoretical model of job search by risk averse, credit constrained agents. In this model we are able to demonstrate analytically that voluntary planned quits can occur as agents cycle between accumulating assets in short term employment and unemployed search for more desirable employment.

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Bibliographic Info

Paper provided by McMaster University in its series Department of Economics Working Papers with number 2002-14.

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Length: 57 pages
Date of creation: 2002
Date of revision:
Handle: RePEc:mcm:deptwp:2002-14

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References

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  1. Stancanelli, E.G.F. & Bloemen, H.G., 1997. "Individual wealth, reservation wages and transitions into employment," Discussion Paper, Tilburg University, Center for Economic Research 9702, Tilburg University, Center for Economic Research.
  2. Gomes, Joao & Greenwood, Jeremy & Rebelo, Sergio, 2001. "Equilibrium unemployment," Journal of Monetary Economics, Elsevier, Elsevier, vol. 48(1), pages 109-152, August.
  3. Rasmus Lentz & Torben Tranæs, 2002. "Job Search and Savings: Wealth Effects and Duration Dependence," CAM Working Papers, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics 2004-11, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics, revised Nov 2003.
  4. Daron Acemoglu & Robert Shimer, 1999. "Productivity Gains from Unemployment Insurance," NBER Working Papers 7352, National Bureau of Economic Research, Inc.
  5. Silvio Rendón, 2002. "Job Search And Asset Accumulation Under Borrowing Constraints," Economics Working Papers we025219, Universidad Carlos III, Departamento de Economía.
  6. Martin Browning & Thomas F. Crossley, 2001. "The Life-Cycle Model of Consumption and Saving," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 15(3), pages 3-22, Summer.
  7. Derek Neal, 1998. "The Complexity of Job Mobility Among Young Men," NBER Working Papers 6662, National Bureau of Economic Research, Inc.
  8. Martin Browning & Thomas Crossley, 1996. "Unemployment Insurance Benefit Levels and Consumption Changes," Discussion Papers 96-11, University of Copenhagen. Department of Economics.
  9. Alison L. Booth & Marco Francesconi & Jeff Frank, 2002. "Temporary Jobs: Stepping Stones or Dead Ends?," LABORatorio R. Revelli Working Papers Series, LABORatorio R. Revelli, Centre for Employment Studies 8, LABORatorio R. Revelli, Centre for Employment Studies.
  10. Rasmus Lentz, 2009. "Optimal Unemployment Insurance in an Estimated Job Search Model with Savings," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(1), pages 37-57, January.
  11. Bloemen, H., 1995. "The Relation Between Wealth and Labour Market Transitions: An Empirical Study for the Netherlands," Papers, Tilburg - Center for Economic Research 9599, Tilburg - Center for Economic Research.
  12. James Costain, 1997. "Unemployment insurance with endogenous search intensity and precautionary saving," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 243, Department of Economics and Business, Universitat Pompeu Fabra.
  13. Stancanelli, E.G.F., 1997. "Do the rich stay unemployed longer? An empirical study for the U.K," Discussion Paper, Tilburg University, Center for Economic Research 97.81, Tilburg University, Center for Economic Research.
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  16. Topel, Robert H & Ward, Michael P, 1992. "Job Mobility and the Careers of Young Men," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 107(2), pages 439-79, May.
  17. Henry S. Farber, 1999. "Alternative and Part-Time Employment Arrangements as a Response to Job Loss," NBER Working Papers 7002, National Bureau of Economic Research, Inc.
  18. Eric F. Smith, 2007. "Limited Duration Employment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 10(3), pages 444-471, July.
  19. Blau, David M & Robins, Philip K, 1990. "Job Search Outcomes for the Employed and Unemployed," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 98(3), pages 637-55, June.
  20. repec:ese:iserwp:2000-05 is not listed on IDEAS
  21. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, American Economic Association, vol. 60(1), pages 126-42, March.
  22. Farber, Henry S, 1999. "Alternative and Part-Time Employment Arrangements as a Response to Job Loss," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 17(4), pages S142-69, October.
  23. Boheim, Rene & Taylor, Mark P., 2002. "The search for success: do the unemployed find stable employment?," Labour Economics, Elsevier, Elsevier, vol. 9(6), pages 717-735, December.
  24. Yann Algan & Arnaud Cheron & Jean-Olivier Hairault & Francois Langot, 2003. "Wealth Effect on Labor Market Transitions," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(1), pages 156-178, January.
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Citations

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Cited by:
  1. Bart Cockx & Matteo Picchio, 2012. "Are Short-lived Jobs Stepping Stones to Long-Lasting Jobs?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, Department of Economics, University of Oxford, vol. 74(5), pages 646-675, October.
  2. Richard Rogerson & Robert Shimer & Randall Wright, 2004. "Search-Theoretic Models of the Labor Market-A Survey," NBER Working Papers 10655, National Bureau of Economic Research, Inc.
  3. Jeremy Lise, 2011. "On-the-Job Search and Precautionary Savings: Theory and Empirics of Earnings and Wealth Inequality," IFS Working Papers, Institute for Fiscal Studies W11/16, Institute for Fiscal Studies.
  4. Luz Adriana Flórez, 2014. "Optimal Policy with Informal Sector and Endogenous Savings," BORRADORES DE ECONOMIA 011960, BANCO DE LA REPÚBLICA.
  5. Tricia Gladden & Michelle Alexopoulos, 2004. "The Effects of Wealth, and Unemployment Benefits on Search Behavior and Labor Market Transitions," Econometric Society 2004 North American Summer Meetings, Econometric Society 517, Econometric Society.
  6. Jahn, Elke J. & Rosholm, Michael, 2014. "Looking beyond the bridge: The effect of temporary agency employment on labor market outcomes," European Economic Review, Elsevier, Elsevier, vol. 65(C), pages 108-125.
  7. Wolff, Joachim & Nivorozhkin, Anton, 2008. "Start me up: The effectiveness of a self-employment programme for needy unemployed people in Germany," IAB Discussion Paper, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany] 200820, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  8. Luz Adriana Flórez, 2014. "Optimal Policy with Informal Sector and Endogenous Savings," Borradores de Economia 833, Banco de la Republica de Colombia.
  9. Guler, Bulent & Guvenen, Fatih & Violante, Giovanni L., 2012. "Joint-search theory: New opportunities and new frictions," Journal of Monetary Economics, Elsevier, Elsevier, vol. 59(4), pages 352-369.

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