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Life Cycle Equilibrium Unemployment

  • Chéron, Arnaud
  • Hairault, Jean-Olivier
  • Langot, François

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 to recoup investment costs, the life-cycle setting implies age-differentiated labor market flows. Whereas the search effort of unemployed workers presents an age-decreasing profile, the age-dynamics of the separation rate can be either decreasing or increasing. Worker heterogeneity in the context of the undirected search implies an intergenerational externality, which is not eliminated by the Hosios condition. We show that age-specific policies are necessary to reach the first best allocation.

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Paper provided by CEPREMAP in its series CEPREMAP Working Papers (Docweb) with number 1103.

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Length: 42 pages
Date of creation: Apr 2011
Date of revision:
Handle: RePEc:cpm:docweb:1103
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  1. Lars Ljungqvist & Thomas J. Sargent, 1995. "The European unemployment dilemma," Working Paper Series, Macroeconomic Issues 95-17, Federal Reserve Bank of Chicago.
  2. Steven J. Davis, 2001. "The Quality Distribution of Jobs and the Structure of Wages in Search Equilibrium," NBER Working Papers 8434, National Bureau of Economic Research, Inc.
  3. Hairault, Jean-Olivier & Chéron, Arnaud & Langot, François, 2007. "Job Creation and Job Destruction over the Life Cycle: The Older Workers in the Spotlight," IZA Discussion Papers 2597, Institute for the Study of Labor (IZA).
  4. Mortensen, Dale T & Pissarides, Christopher, 1999. "New Developments in Models of Search in the Labour Market," CEPR Discussion Papers 2053, C.E.P.R. Discussion Papers.
  5. Moen, Espen R, 1997. "Competitive Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 385-411, April.
  6. Sheshinski, Eytan, 1978. "A model of social security and retirement decisions," Journal of Public Economics, Elsevier, vol. 10(3), pages 337-360, December.
  7. Richard Rogerson, 2006. "Understanding Differences in Hours Worked," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(3), pages 365-409, July.
  8. 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.
  9. Hosios, Arthur J, 1990. "On the Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 57(2), pages 279-98, April.
  10. Edward C. Prescott, 2004. "Why do Americans work so much more than Europeans?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Jul, pages 2-13.
  11. Dale T. Mortensen & Christopher A. Pissarides, 1993. "Job Creation and Job Destruction in the Theory of Unemployment," CEP Discussion Papers dp0110, Centre for Economic Performance, LSE.
  12. Arnaud Chéron & Jean-Olivier Hairault & François Langot, 2011. "Age-Dependent Employment Protection," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00623282, HAL.
  13. Bartel, Ann P & Sicherman, Nachum, 1993. "Technological Change and Retirement Decisions of Older Workers," Journal of Labor Economics, University of Chicago Press, vol. 11(1), pages 162-83, January.
  14. Pedro Portugal & Olivier Blanchard, 2001. "What Hides Behind an Unemployment Rate: Comparing Portuguese and U.S. Labor Markets," American Economic Review, American Economic Association, vol. 91(1), pages 187-207, March.
  15. Michael Sattinger, 2003. "Overlapping Labour Markets," Discussion Papers 03-06, University at Albany, SUNY, Department of Economics.
  16. Maite Blázquez & Marcel Jansen, 2005. "Search, Mismatch and Unemployment," Labor and Demography 0510012, EconWPA.
  17. Judith K. Hellerstein & David Neumark & Kenneth R. Troske, 1996. "Wages, Productivity, and Worker Characteristics: Evidence from Plant-Level Production Functions and Wage Equations," NBER Working Papers 5626, National Bureau of Economic Research, Inc.
  18. James Albrecht & Lucas Navarro & Susan Vroman, 2009. "Efficiency in a Search and Matching Model with Endogenous Participation," ILADES-Georgetown University Working Papers inv218, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines.
  19. Robert Hutchens, 1988. "Do job opportunities decline with age?," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 42(1), pages 89-99, October.
  20. Seater, John J., 1977. "A unified model of consumption, labor supply, and job search," Journal of Economic Theory, Elsevier, vol. 14(2), pages 349-372, April.
  21. Heckman, James J, 1974. "Life Cycle Consumption and Labor Supply: An Explanation of the Relationship Between Income and Consumption Over the Life Cycle," American Economic Review, American Economic Association, vol. 64(1), pages 188-94, March.
  22. Robert E. Hall, 2005. "Employment Fluctuations with Equilibrium Wage Stickiness," American Economic Review, American Economic Association, vol. 95(1), pages 50-65, March.
  23. Arnaud CHÉRON & Jean-Olivier HAIRAULT & François LANGOT, 2009. "The Role of Institutions in Transatlantic Employment Differences: A Life-Cycle View," Annales d'Economie et de Statistique, ENSAE, issue 95-96, pages 121-138.
  24. Jean-Olivier Hairault & Francois Langot & Thepthida Sopraseuth, 2010. "Distance to Retirement and Older Workers' Employment: The Case for Delaying the Retirement Age," Journal of the European Economic Association, MIT Press, vol. 8(5), pages 1034-1076, 09.
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