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Unstable Relationships

Author

Listed:
  • Burdett Kenneth

    () (University of Pennsylvania)

  • Imai Ryoichi

    () (Kyushu University)

  • Wright Randall

    () (University of Pennsylvania)

Abstract

We analyze models where agents search for partners to form relationships (employment, marriage, etc.), and may or may not continue searching for different partners while matched. Matched agents are less inclined to search if their match yields more utility, and also if it is more stable. If one partner searches the relationship is less stable, so the other is more inclined to search, potentially making instability a self-fulfilling prophecy. We show this can generate multiple -- indeed, a continuum of -- equilibria. We investigate efficiency and show that in any equilibrium there tends to be too much turnover, unemployment, and inequality. We calibrate an example to see how well the model can account for job-to-job transitions, and to see how much endogenous instability matters.

Suggested Citation

  • Burdett Kenneth & Imai Ryoichi & Wright Randall, 2004. "Unstable Relationships," The B.E. Journal of Macroeconomics, De Gruyter, vol. 1(1), pages 1-44, January.
  • Handle: RePEc:bpj:bejmac:v:frontiers.1:y:2004:i:1:n:1
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    References listed on IDEAS

    as
    1. Garey Ramey & Joel Watson, 1997. "Contractual Fragility, Job Destruction, and Business Cycles," The Quarterly Journal of Economics, Oxford University Press, vol. 112(3), pages 873-911.
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    5. Bruce C. Fallick & Charles A. Fleischman, 2001. "The importance of employer-to-employer flows in the U.S. labor market," Finance and Economics Discussion Series 2001-18, Board of Governors of the Federal Reserve System (U.S.).
    6. Masters, Adrian M, 1999. "Wage Posting in Two-Sided Search and the Minimum Wage," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 809-826, November.
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    9. Kranton, Rachel E, 1996. "The Formation of Cooperative Relationships," Journal of Law, Economics, and Organization, Oxford University Press, vol. 12(1), pages 214-233, April.
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    Citations

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    Cited by:

    1. Nobuhiro Kiyotaki & Ricardo Lagos, 2007. "A Model of Job and Worker Flows," Journal of Political Economy, University of Chicago Press, vol. 115(5), pages 770-819, October.
    2. Lauermann, Stephan & Nöldeke, Georg, 2014. "Stable marriages and search frictions," Journal of Economic Theory, Elsevier, vol. 151(C), pages 163-195.
    3. repec:mhr:jinste:urn:sici:0932-4569(201712)173:4_688:jh_2.0.tx_2- is not listed on IDEAS
    4. Pieter A. Gautier & Michael Svarer & Coen N. Teulings, 2007. "Sin City?," Economics Working Papers 2007-01, Department of Economics and Business Economics, Aarhus University.
    5. Kawata, Keisuke, 2015. "Work hour mismatches and on-the-job search," Economic Modelling, Elsevier, vol. 47(C), pages 280-291.
    6. Gautier, Pieter A. & Svarer, Michael & Teulings, Coen, 2005. "Marriage and the City," IZA Discussion Papers 1491, Institute for the Study of Labor (IZA).
    7. Jakub Steiner, 2006. "Coordination of Mobile Labor," ESE Discussion Papers 152, Edinburgh School of Economics, University of Edinburgh.
    8. Pieter A. Gautier & Michael Svarer & Coen N. Teulings, 2009. "Sin City? Why is the Divorce Rate Higher in Urban Areas?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(3), pages 439-456, September.
    9. Ueda, Kenichi, 2013. "Banks as coordinators of economic growth and stability: Microfoundation for macroeconomy with externality," Journal of Economic Theory, Elsevier, vol. 148(1), pages 322-352.
    10. Pieter Gautier & Michael Svarer & Coen Teulings, 2005. "Testing for Additive Outliers in Seasonally Integrated Time Series," Economics Working Papers 2005-01, Department of Economics and Business Economics, Aarhus University.
    11. Matthew J. Baker & Ingmar Nyman, 2017. "Job Hoarding," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 173(4), pages 688-722, December.
    12. Li, Li & Mak, Eric, 2016. "Marriage, Divorce, Remarriage: The Catalyst Effect of Unilateral Divorce," MPRA Paper 83330, University Library of Munich, Germany.
    13. Bonilla Roberto & Burdett Kenneth, 2010. "On-the-Job Search and Labor Market Equilibrium," The B.E. Journal of Macroeconomics, De Gruyter, vol. 10(1), pages 1-28, March.
    14. Coles, Melvyn & Francesconi, Marco, 2007. "On the Emergence of Toyboys: Equilibrium Matching with Ageing and Uncertain Careers," IZA Discussion Papers 2612, Institute for the Study of Labor (IZA).
    15. Byeongju Jeong, 2003. "The Welfare Effects of Mobility Restrictions," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(3), pages 685-696, July.
    16. Ueda, Kenichi, 2013. "Banks as coordinators of economic growth and stability: Microfoundation for macroeconomy with externality," Journal of Economic Theory, Elsevier, vol. 148(1), pages 322-352.
    17. Tracy J. Cornelius, 2003. "A Search Model of Marriage and Divorce," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(1), pages 135-155, January.
    18. Gautier, Pieter A. & Svarer, Michael & Teulings, Coen N., 2010. "Marriage and the city: Search frictions and sorting of singles," Journal of Urban Economics, Elsevier, vol. 67(2), pages 206-218, March.
    19. Ingmar Nyman & Matthew Baker, 2008. "Conformity in search markets," Economics Working Paper Archive at Hunter College 422, Hunter College Department of Economics.
    20. Matthew Baker & Ingmar Nyman, 2009. "Competitive Pressure and Lying in Search Markets," Economics Working Paper Archive at Hunter College 426, Hunter College Department of Economics.
    21. Steiner, Jakub, 2008. "Coordination of mobile labor," Journal of Economic Theory, Elsevier, vol. 139(1), pages 25-46, March.
    22. Adrian Masters, 2008. "Marriage, Commitment and Divorce in a Matching Model with Differential Aging," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(3), pages 614-628, July.

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