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Directed Search on the Job, Heterogeneity, and Aggregate Fluctuations

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Author Info

  • Guido Menzio
  • Shouyong Shi

Abstract

We study a labor market where workers search for jobs both on the job and off the job. In the model, there are aggregate productivity shocks and match-specific shocks. We outline the proof of existence of an equilibrium which we call a block recursive equilibrium (BRE), in which individuals' decisions and market tightness are independent of the distribution of workers over wages or contracts. A critical assumption that is responsible for a BRE to exist is that search is directed by firms' posting of contracts. We explain why a BRE does exist under the assumption of directed search and why it does not under the assumption of random search. Finally, we generalize the proof of existence of a BRE to allow workers to be ex-ante heterogeneous with respect to some observable characteristics such as education and skill.

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File URL: http://www.economics.utoronto.ca/public/workingPapers/tecipa-390.pdf
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Bibliographic Info

Paper provided by University of Toronto, Department of Economics in its series Working Papers with number tecipa-390.

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Length: 8 pages
Date of creation: 21 Jan 2010
Date of revision:
Handle: RePEc:tor:tecipa:tecipa-390

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Keywords: Directed Search; On the Job Search; Heterogeneity; Aggregate Fluctuations;

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References

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  1. Guido Menzio & Shouyong Shi, 2009. "Block Recursive Equilibria for Stochastic Models of Search on the Job," Working Papers tecipa-347, University of Toronto, Department of Economics.
  2. Guido Menzio & Shouyong Shi, 2011. "Efficient Search on the Job and the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 119(3), pages 468 - 510.
  3. Ken Burdett & Melvyn Coles, 2003. "Equilibrium Wage-Tenure Contracts," Econometrica, Econometric Society, vol. 71(5), pages 1377-1404, 09.
  4. Alain Delacroix & Shouyong Shi, 2006. "Directed Search On The Job And The Wage Ladder," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(2), pages 651-699, 05.
  5. 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.
  6. Burdett, Kenneth & Mortensen, Dale T, 1998. "Wage Differentials, Employer Size, and Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 257-73, May.
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Citations

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Cited by:
  1. Melvyn G. Coles & Dale T. Mortensen, 2012. "Equilibrium Labor Turnover, Firm Growth and Unemployment," NBER Working Papers 18022, National Bureau of Economic Research, Inc.
  2. repec:ese:iserwp:2013-01 is not listed on IDEAS
  3. Carlos Carrillo-Tudela & Ludo Visschers, 2013. "Unemployment and Endogenous Reallocation over the Business Cycle," CESifo Working Paper Series 4079, CESifo Group Munich.
  4. Dale T. Mortensen, 2010. "Dynamic Monopsonistic Competition and Labor Market Equilibrium," 2010 Meeting Papers 164, Society for Economic Dynamics.
  5. Guido Menzio & Irina A. Telyukova & Ludo Visschers, 2012. "Directed Search over the Life Cycle," PIER Working Paper Archive 12-002, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  6. Belén Jerez, 2012. "Competitive equilibrium with search frictions : a general equilibrium approach," Economics Working Papers we1235, Universidad Carlos III, Departamento de Economía.
  7. Guido Menzio & Shouyong Shi, 2008. "Efficient Search on the Job and the Business Cycle," PIER Working Paper Archive 08-029, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  8. Wolthoff, Ronald P., 2011. "It's About Time: Implications of the Period Length in an Equilibrium Job Search Model," IZA Discussion Papers 6002, Institute for the Study of Labor (IZA).
  9. Coles, Melvyn G & Kelishomi, Ali Moghaddasi, 2011. "New Business Start-ups and the Business Cycle," CEPR Discussion Papers 8588, C.E.P.R. Discussion Papers.
  10. Melvyn G. Coles & Dale T. Mortensen, 2011. "Equilibrium Wage and Employment Dynamics in a Model of Wage Posting without Commitment," NBER Working Papers 17284, National Bureau of Economic Research, Inc.
  11. John Kennes & Daniel le Maire, 2010. "Coordination Frictions and Job Heterogeneity: A Discrete Time Analysis," Economics Working Papers 2010-05, School of Economics and Management, University of Aarhus.

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