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Asset Accumulation and Short Term Employment

  • Martin Browning

    (Institute of Economics, University of Copenhagen)

  • Thomas F. Crossley

    (McMaster University)

  • Eric Smith

    (University of Essex)

This paper investigates the search and consumption behavior of workers as they move between readily available low wage employment and uncertain search for a high wage job. Analytic results derived from our model include: (1) voluntary planned quits occur in a cyclical pattern, (2) consumption while searching falls over time until either a good job is found or assets run out and the worker accepts a low wage job, (3) consumption during low wage employment is less than earnings, and (4) the durations of job search and employment as well as the pattern of consumption are related to turnover costs and wages. Empirical evidence from the 1995 Canadian out of Employment Panel (COEP) broadly supports these relationships. In these data, there exists a high incidence of displaced workers taking temporary low wage jobs. Examining the income, consumption and savings patterns of workers in different regimes, we fiind that these accord with the theoretical predictions.

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File URL: http://www.econ.ku.dk/cam/wp0910/wp0203/2003-02.pdf/
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Paper provided by University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics in its series CAM Working Papers with number 2003-02.

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Length: 19 pages
Date of creation: Feb 2003
Date of revision:
Handle: RePEc:kud:kuieca:2003_02
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  1. Boheim, Rene & Taylor, Mark P., 2002. "The search for success: do the unemployed find stable employment?," Labour Economics, Elsevier, vol. 9(6), pages 717-735, December.
  2. Joao Gomes & Jeremy Greenwood & Sergio T. Rebelo, 2001. "Equilibrium Unemployment," RCER Working Papers 479, University of Rochester - Center for Economic Research (RCER).
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  4. Alison L. Booth & Marco Francesconi & Jeff Frank, 2002. "Temporary Jobs: Stepping Stones or Dead Ends?," LABORatorio R. Revelli Working Papers Series 8, LABORatorio R. Revelli, Centre for Employment Studies.
  5. Bloemen, H.G., 1995. "The relation between wealth and labour market transitions: An empirical study for the Netherlands," Discussion Paper 1995-99, .
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  7. Derek Neal, 1998. "The Complexity of Job Mobility Among Young Men," NBER Working Papers 6662, National Bureau of Economic Research, Inc.
  8. Robert H. Topel & Michael P. Ward, 1988. "Job Mobility and the Careers of Young Men," NBER Working Papers 2649, National Bureau of Economic Research, Inc.
  9. Daron Acemoglu & Robert Shimer, 1999. "Productivity Gains from Unemployment Insurance," Working papers 99-29, Massachusetts Institute of Technology (MIT), Department of Economics.
  10. Rasmus Lentz, 2003. "Optimal Unemployment Insurance in an Estimated Job Search Model with Savings," CAM Working Papers 2004-10, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
  11. Yann Algan & Arnaud Cheron & Jean-Olivier Hairault & Francois Langot, 2003. "Wealth Effect on Labor Market Transitions," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(1), pages 156-178, January.
  12. Farber, Henry S, 1999. "Alternative and Part-Time Employment Arrangements as a Response to Job Loss," Journal of Labor Economics, University of Chicago Press, vol. 17(4), pages S142-69, October.
  13. Martin Browning & Thomas Crossley, 1996. "Unemployment Insurance Benefit Levels and Consumption Changes," Department of Economics Working Papers 1996-01, McMaster University.
  14. Rasmus Lentz & Torben Tranas, 2005. "Job Search and Savings: Wealth Effects and Duration Dependence," Journal of Labor Economics, University of Chicago Press, vol. 23(3), pages 467-490, July.
  15. Blau, David M & Robins, Philip K, 1990. "Job Search Outcomes for the Employed and Unemployed," Journal of Political Economy, University of Chicago Press, vol. 98(3), pages 637-55, June.
  16. Martin Browning & Thomas F. Crossley, 2001. "The lifecycle model of consumption and saving," IFS Working Papers W01/15, Institute for Fiscal Studies.
  17. Stancanelli, Elena G F, 1999. " Do the Rich Stay Unemployed Longer? An Empirical Study for the UK," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(3), pages 295-314, August.
  18. Stancanelli, E.G.F. & Bloemen, H.G., 1997. "Individual wealth, reservation wages and transitions into employment," Discussion Paper 9702, .
  19. Hans Bloemen & Elena Stancanelli, 2001. "Individual Wealth, Reservation Wages, and Transitions into Employment," Sciences Po publications info:hdl:2441/9704, Sciences Po.
  20. Harry J. Holzer, 1987. "Job search by employed and unemployed youth," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 40(4), pages 601-611, July.
  21. Silvio Rendón, 2002. "Job Search And Asset Accumulation Under Borrowing Constraints," Economics Working Papers we025219, Universidad Carlos III, Departamento de Economía.
  22. Henry S. Farber, 1999. "Alternative and Part-Time Employment Arrangements as a Response to Job Loss," NBER Working Papers 7002, National Bureau of Economic Research, Inc.
  23. Eric F. Smith, 2007. "Limited Duration Employment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 10(3), pages 444-471, July.
  24. James Costain, 1997. "Unemployment insurance with endogenous search intensity and precautionary saving," Economics Working Papers 243, Department of Economics and Business, Universitat Pompeu Fabra.
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