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Directed Search over the Life Cycle

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  • Guido Menzio

    ()
    (Department of Economics, University of Pennsylvania)

  • Irina A. Telyukova

    ()
    (Department of Economics, University of California, San Diego)

  • Ludo Visschers

    ()
    (Universidad Carlos III de Madrid)

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 Penn Institute for Economic Research, Department of Economics, University of Pennsylvania in its series PIER Working Paper Archive with number 12-002.

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Length: 54 pages
Date of creation: 04 Jan 2012
Date of revision:
Handle: RePEc:pen:papers:12-002

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Keywords: Directed Search; Labor Reallocation; Lifecycle;

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References

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  1. 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.
  2. Tony Smith & M. Fatih Guvenen, 2007. "Inferring Labor Income Risk from Economic Choices: An Indirect Inference Approach," 2007 Meeting Papers, Society for Economic Dynamics 1024, Society for Economic Dynamics.
  3. Guido Menzio & Shouyong Shi, 2011. "Efficient Search on the Job and the Business Cycle," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 119(3), pages 468 - 510.
  4. Guido Menzio & Shouyong Shi, 2010. "Directed Search on the Job, Heterogeneity, and Aggregate Fluctuations," Working Papers tecipa-390, University of Toronto, Department of Economics.
  5. Postel-Vinay, Fabien & Robin, Jean-Marc, 2002. "Equilibrium Wage Dispersion with Worker and Employer Heterogeneity," CEPR Discussion Papers 3548, C.E.P.R. Discussion Papers.
  6. Costas Meghir & Luigi Pistaferri, 2004. "Income Variance Dynamics and Heterogeneity," Econometrica, Econometric Society, Econometric Society, vol. 72(1), pages 1-32, 01.
  7. Hamish Low & Costas Meghir & Luigi Pistaferri, 2010. "Wage Risk and Employment Risk over the Life Cycle," American Economic Review, American Economic Association, vol. 100(4), pages 1432-67, September.
  8. Guido Menzio & Shouyong Shi, 2008. "Efficient Search on the Job and the Business Cycle, Second Version," PIER Working Paper Archive 09-010, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 28 Feb 2009.
  9. Arnaud Ch�ron & Jean-Olivier Hairault & Fran�ois Langot, 2013. "Life-Cycle Equilibrium Unemployment," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 31(4), pages 843 - 882.
  10. Julen Esteban-Pretel & Junichi Fujimoto, 2011. "Life-Cycle Labor Search with Stochastic Match Quality," CIRJE F-Series CIRJE-F-783, CIRJE, Faculty of Economics, University of Tokyo.
  11. Shouyong Shi & Guido Menzio, 2009. "Block Recursive Equilibria for Stochastic Models of Search on the Job," 2009 Meeting Papers, Society for Economic Dynamics 177, Society for Economic Dynamics.
  12. Fabien Postel-Vinay & Hélène Turon, 2006. "On-the-job Search, Productivity Shocks, and the Individual Earnings Process," The Centre for Market and Public Organisation 06/141, Department of Economics, University of Bristol, UK.
  13. Katharine G. Abraham & Robert Shimer, 2001. "Changes in Unemployment Duration and Labor Force Attachment," NBER Working Papers 8513, National Bureau of Economic Research, Inc.
  14. Arnaud Chéron & Jean‐Olivier Hairault & François Langot, 2011. "Age‐Dependent Employment Protection," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 121(557), pages 1477-1504, December.
  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. repec:hal:wpaper:halshs-00590726 is not listed on IDEAS
  17. 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.
  18. Aspen Gorry, 2012. "Experience and Worker Flows," 2012 Meeting Papers, Society for Economic Dynamics 154, Society for Economic Dynamics.
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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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