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Life Cycle Equilibrium Unemployment

Author Info

Listed author(s):
  • Chéron, Arnaud
  • Hairault, Jean-Olivier
  • Langot, François

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 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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File URL: http://www.cepremap.fr/depot/docweb/docweb1103.pdf
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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
Handle: RePEc:cpm:docweb:1103
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Keywords: search; matching; retirement; life cycle;

Other versions of this item:

Find related papers by 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

This paper has been announced in the following NEP Reports:

References listed on IDEAS
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  1. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, July.
  2. 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.
  3. Acemoglu, Daron, 2001. "Good Jobs versus Bad Jobs," Journal of Labor Economics, University of Chicago Press, vol. 19(1), pages 1-21, January.
  4. Mortensen, Dale & Pissarides, Christopher, 2011. "Job Creation and Job Destruction in the Theory of Unemployment," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 1-19.
  5. 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).
  6. Hairault, Jean-Olivier & Langot, François & Ménard, Sébastien & Sopraseuth, Thepthida, 2012. "Optimal unemployment insurance for older workers," Journal of Public Economics, Elsevier, vol. 96(5), pages 509-519.
  7. repec:hal:pseose:halshs-00856144 is not listed on IDEAS
  8. Arnaud Chéron & Jean‐Olivier Hairault & François Langot, 2011. "Age‐Dependent Employment Protection," Economic Journal, Royal Economic Society, vol. 121(557), pages 1477-1504, December.
  9. Guido Menzio & Irina Telyukova & Ludo Visschers, 2016. "Directed Search over the Life Cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 19, pages 38-62, January.
  10. Mortensen, Dale T. & Pissarides, Christopher A., 1999. "New developments in models of search in the labor market," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 39, pages 2567-2627 Elsevier.
  11. Christopher A. Pissarides & Barbara Petrongolo, 2001. "Looking into the Black Box: A Survey of the Matching Function," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 390-431, June.
  12. 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 162-183, January.
  13. 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.
  14. Robert M. Hutchens, 1988. "Do Job Opportunities Decline with Age?," ILR Review, Cornell University, ILR School, vol. 42(1), pages 89-99, October.
  15. 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.
  16. 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.
  17. Lars Ljungqvist & Thomas J. Sargent, 2008. "Two Questions about European Unemployment," Econometrica, Econometric Society, vol. 76(1), pages 1-29, 01.
  18. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-1284, December.
  19. Lars Ljungqvist & Thomas J. Sargent, 1998. "The European Unemployment Dilemma," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 514-550, June.
  20. Albrecht, James & Navarro, Lucas & Vroman, Susan, 2010. "Efficiency in a search and matching model with endogenous participation," Economics Letters, Elsevier, vol. 106(1), pages 48-50, January.
  21. Sheshinski, Eytan, 1978. "A model of social security and retirement decisions," Journal of Public Economics, Elsevier, vol. 10(3), pages 337-360, December.
  22. 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.
  23. Arnaud Chéron & Jean-Olivier Hairault & François Langot, 2009. "The Role of Institutions in Transatlantic Employment Differences: A Life-Cycle View," Annals of Economics and Statistics, GENES, issue 95-96, pages 121-138.
  24. Sattinger, Michael, 2006. "Overlapping labour markets," Labour Economics, Elsevier, vol. 13(2), pages 237-257, April.
  25. Blázquez, Maite & Jansen, Marcel, 2008. "Search, mismatch and unemployment," European Economic Review, Elsevier, vol. 52(3), pages 498-526, April.
  26. Moen, Espen R, 1997. "Competitive Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 385-411, April.
  27. Giuseppe Bertola & Ricardo J. Caballero, 1994. "Cross-Sectional Efficiency and Labour Hoarding in a Matching Model of Unemployment," Review of Economic Studies, Oxford University Press, vol. 61(3), pages 435-456.
  28. 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.
  29. Hellerstein, Judith K & Neumark, David & Troske, Kenneth R, 1999. "Wages, Productivity, and Worker Characteristics: Evidence from Plant-Level Production Functions and Wage Equations," Journal of Labor Economics, University of Chicago Press, vol. 17(3), pages 409-446, July.
  30. repec:hal:cesptp:halshs-00856144 is not listed on IDEAS
  31. 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 188-194, March.
  32. repec:hal:wpaper:hal-00668989 is not listed on IDEAS
  33. Arthur J. Hosios, 1990. "On The Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Oxford University Press, vol. 57(2), pages 279-298.
  34. Robert E. Hall, 2005. "Employment Fluctuations with Equilibrium Wage Stickiness," American Economic Review, American Economic Association, vol. 95(1), pages 50-65, March.
  35. Leon J.H. Bettendorf & D. Peter Broer, 2003. "Lifetime Labor Supply in a Search Model of Unemployment," Tinbergen Institute Discussion Papers 03-032/2, Tinbergen Institute.
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