Search and matching in the labor market without unemployment insurance
AbstractWe study the differences between complete and incomplete markets against idiosyncratic shocks in a search model of the labor market in which the distribution of idiosyncratic uncertainty is determined endogenously. We show that in addition to the usual wealth effect at high levels of wealth, costly search introduces a wealth effect at low levels of wealth such that poor agents may find it optimal not to look for a job. We find conditions under which the long run equilibrium is such that there is no production with incomplete market. This equilibrium is at odds with the one obtained under the assumption of complete markets. It is also at odds with the equilibrium one would obtain under the usual assumption in the literature that idiosyncratic uncertainty is ``policy invariant" (or invariant to the market arrangement). In the second part of the paper we use numerical methods to obtain quantitative predictions of the model under a less stringent assumption such that the probability of finding a job may be positive even if search effort equals zero.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Society for Economic Dynamics in its series 2012 Meeting Papers with number 340.
Date of creation: 2012
Date of revision:
Contact details of provider:
Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
Web page: http://www.EconomicDynamics.org/society.htm
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Krusell, Per & Mukoyama, Toshihiko & Sahin, Aysegul, 2009.
"Labor-Market Matching with Precautionary Savings and Aggregate Fluctuations,"
CEPR Discussion Papers
7429, C.E.P.R. Discussion Papers.
- Per Krusell & Toshihiko Mukoyama & AyşegÃ¼l Şahin, 2010. "Labour-Market Matching with Precautionary Savings and Aggregate Fluctuations," Review of Economic Studies, Oxford University Press, vol. 77(4), pages 1477-1507.
- Per Krusell & Toshihiko Mukoyama & Ayseg ul Sahin, 2007. "Labor-Market Matching with Precautionary Savings and Aggregate Fluctuations," Levine's Bibliography 122247000000001783, UCLA Department of Economics.
- Per Krusell & Toshihiko Mukoyama & Aysegul Sahin, 2009. "Labor-Market Matching with Precautionary Savings and Aggregate Fluctuations," NBER Working Papers 15282, National Bureau of Economic Research, Inc.
- repec:fth:starer:8415 is not listed on IDEAS
- Juan C. Conesa & Dirk Krueger, 1999. "Social Security Reform with Heterogeneous Agents," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(4), pages 757-795, October.
- S. Rao Aiyagari, 1993.
"Uninsured idiosyncratic risk and aggregate saving,"
502, Federal Reserve Bank of Minneapolis.
- Gomes, Joao & Greenwood, Jeremy & Rebelo, Sergio, 2001.
Journal of Monetary Economics,
Elsevier, vol. 48(1), pages 109-152, August.
- Joao Gomes & Jeremy Greenwood & Sergio Rebelo, 1997. "Equilibrium Unemployment," NBER Working Papers 5922, National Bureau of Economic Research, Inc.
- Gomes, Joao F & Greenwood, Jeremy & Rebelo, Sérgio, 1997. "Equilibrium Unemployment," CEPR Discussion Papers 1602, C.E.P.R. Discussion Papers.
- Joao Gomes & Jeremy Greenwood & Sergio T. Rebelo, 2001. "Equilibrium Unemployment," RCER Working Papers 479, University of Rochester - Center for Economic Research (RCER).
- Gary Chamberlain & Charles A. Wilson, 2000.
"Optimal Intertemporal Consumption Under Uncertainty,"
Review of Economic Dynamics,
Elsevier for the Society for Economic Dynamics, vol. 3(3), pages 365-395, July.
- Pissarides, Christopher A, 1985. "Short-run Equilibrium Dynamics of Unemployment Vacancies, and Real Wages," American Economic Review, American Economic Association, vol. 75(4), pages 676-90, September.
- Merz, Monika, 1995. "Search in the labor market and the real business cycle," Journal of Monetary Economics, Elsevier, vol. 36(2), pages 269-300, November.
- Mortensen, Dale T & Pissarides, Christopher A, 1994.
"Job Creation and Job Destruction in the Theory of Unemployment,"
Review of Economic Studies,
Wiley Blackwell, vol. 61(3), pages 397-415, July.
- Dale T. Mortensen & Christopher A. Pissarides, 1993. "Job Creation and Job Destruction in the Theory of Unemployment," CEP Discussion Papers dp0110, Centre for Economic Performance, LSE.
- Athreya, Kartik B., 2002. "Welfare implications of the Bankruptcy Reform Act of 1999," Journal of Monetary Economics, Elsevier, vol. 49(8), pages 1567-1595, November.
- Igor Livshits & James MacGee & Michele Tertilt, 2005.
"Consumer Bankruptcy: A Fresh Start,"
04-011, Stanford Institute for Economic Policy Research.
- Andolfatto, David, 1996. "Business Cycles and Labor-Market Search," American Economic Review, American Economic Association, vol. 86(1), pages 112-32, March.
- Benhabib, Jess & Bull, Clive, 1983. "Job Search: The Choice of Intensity," Journal of Political Economy, University of Chicago Press, vol. 91(5), pages 747-64, October.
- Gary Hansen, 2010.
"Indivisible Labor and the Business Cycle,"
Levine's Working Paper Archive
233, David K. Levine.
- Makoto Nakajima, 2010.
"Business cycles in the equilibrium model of labor market search and self-insurance,"
10-24, Federal Reserve Bank of Philadelphia.
- Makoto Nakajima, 2012. "Business Cycles In The Equilibrium Model Of Labor Market Search And Self‐Insurance," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(2), pages 399-432, 05.
- Huggett, Mark, 1997. "The one-sector growth model with idiosyncratic shocks: Steady states and dynamics," Journal of Monetary Economics, Elsevier, vol. 39(3), pages 385-403, August.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann).
If references are entirely missing, you can add them using this form.