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Life-Cycle Equilibrium Unemployment

  • Arnaud Ch�ron
  • Jean-Olivier Hairault
  • Fran�ois Langot

This paper extends the job creation–job destruction approach to the labor market to take into account a deterministic finite horizon. As hirings and separations depend on the time over which investment costs can be recouped, the life-cycle setting implies age-differentiated labor-market flows. While search by the unemployed falls with age, the separation rate is rather U-shaped over the life cycle. Worker heterogeneity in the context of undirected search implies an intergenerational externality, which is not eliminated by the Hosios condition. We show that age-specific policies are required to attain the first-best allocation.

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Article provided by University of Chicago Press in its journal Journal of Labor Economics.

Volume (Year): 31 (2013)
Issue (Month): 4 ()
Pages: 843 - 882

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Handle: RePEc:ucp:jlabec:doi:10.1086/669941
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