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Life-Cycle Equilibrium Unemployment

Author

Listed:
  • Arnaud Chéron
  • Jean-Olivier Hairault
  • François Langot

Abstract

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.

Suggested Citation

  • Arnaud Chéron & Jean-Olivier Hairault & François Langot, 2013. "Life-Cycle Equilibrium Unemployment," Journal of Labor Economics, University of Chicago Press, vol. 31(4), pages 843-882.
  • Handle: RePEc:ucp:jlabec:doi:10.1086/669941
    DOI: 10.1086/669941
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    More about this item

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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