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Job Search and Asset Accumulation under Borrowing Constraints

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Author Info
Silvio Rendon

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Abstract

In this paper I show how borrowing constraints and job search interact. I fit a dynamic model to data from the National Longitudinal Survey (1979-cohort) and show that borrowing constraints are significant. Agents with more initial assets and more access to credit attain higher wages for several periods after high school graduation. The unemployed maintain their consumption by running down their assets, while the employed save to buffer against future unemployment spells. I also show that, unlike in models with exogenous income streams, unemployment transfers, by allowing agents to attain higher wages do not 'crowd out' but increase saving.

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Publisher Info
Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 649.

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Date of creation: Oct 2002
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Handle: RePEc:upf:upfgen:649

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Related research
Keywords: Job search; asset accumulation liquidity constraints; consumption; unemployment; estimation of dynamic structural models;

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Find related papers by JEL classification:
C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data
E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search

References listed on IDEAS
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.:

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Full references

Cited by:
(explanations, 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.)

  1. Thomas F. Crossley & Hamish W. Low, 2004. "Borrowing Constraints, the Cost of Precautionary Saving, and Unemployment Insurance," Quantitative Studies in Economics and Population Research Reports 391, McMaster University. [Downloadable!]
    Other versions:
  2. Ramon Marimon & Fabrizio Zilibotti, 1997. "Unemployment vs. Mismatch of Talents: Reconsidering Unemployment Benefits," NBER Working Papers 6038, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. 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 517, Econometric Society. [Downloadable!]
  4. Sangeeta Pratap & Silvio Rendon, 2003. "Firm Investment in Imperfect Capital Markets: A Structural Estimation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(3), pages 513-545, July. [Downloadable!] (restricted)
    Other versions:
  5. Sílvio Rendon, 2003. "Does Wealth Explain Black-White Differences In Early Employment Careers?," Economics Working Papers we032303, Universidad Carlos III, Departamento de Economía. [Downloadable!]
    Other versions:
  6. Hamish Low & Costas Meghir & Luigi Pistaferri, 2006. "Wage risk and employment risk over the life cycle," IFS Working Papers W06/27, Institute for Fiscal Studies. [Downloadable!]
    Other versions:
  7. Silvio Rendon & Alfredo Cuecuecha, 2007. "International Job Search: Mexicans in and out of the U.S," Working Papers 0709, Centro de Investigacion Economica, ITAM. [Downloadable!]
    Other versions:
  8. Reichling, Felix, 2006. "Optimal Unemployment Insurance in Labor Market Equilibrium when Workers can Self-Insure," MPRA Paper 5362, University Library of Munich, Germany, revised 16 Oct 2007. [Downloadable!]
  9. James Costain, 1997. "Unemployment Insurance with Endogenous Search Intensity and Precautionary Saving," Economics Working Papers 243, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
  10. Thomas Crossley & Hamish Low, 2004. "When Might Unemployment Insurance Matter?," Department of Economics Working Papers 2004-04, McMaster University. [Downloadable!]
  11. Bulent Guler & Fatih Guvenen & Giovanni L. Violante, 2009. "Joint-Search Theory: New Opportunities and New Frictions," NBER Working Papers 15011, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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