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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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  2. 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.
  3. 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.
  4. Martin Browning & Thomas F. Crossley, 2001. "The lifecycle model of consumption and saving," IFS Working Papers W01/15, Institute for Fiscal Studies.
  5. 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.
  6. 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.
  7. Martin Browning & Thomas Crossley, 1999. "Unemployment Insurance Benefit Levels and Consumption Changes," CEPR Discussion Papers 405, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  8. Stancanelli, E.G.F., 1997. "Do the rich stay unemployed longer? An empirical study for the U.K," Discussion Paper 97.81, Tilburg University, Center for Economic Research.
  9. Louis S. Jacobson & Robert J. LaLonde & Daniel Sullivan, 1992. "Earnings Losses of Displaced Workers," Upjohn Working Papers and Journal Articles 92-11, W.E. Upjohn Institute for Employment Research.
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  13. repec:dgr:kubcen:199599 is not listed on IDEAS
  14. 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.
  15. Rasmus Lentz, 2009. "Optimal Unemployment Insurance in an Estimated Job Search Model with Savings," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(1), pages 37-57, January.
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  18. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-42, March.
  19. Booth, Alison L. & Francesconi, Marco & Frank, Jeff, 2000. "Temporary Jobs: Stepping Stones or Dead Ends?," IZA Discussion Papers 205, Institute for the Study of Labor (IZA).
  20. Bloemen, H.G. & Stancanelli, E.G.F., 1997. "Individual Wealth, Reservation Wages and Transitions into Employment," Discussion Paper 1997-02, Tilburg University, Center for Economic Research.
  21. 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.
  22. Silvio Rendon, 2002. "Job search and asset accumulation under borrowing constraints," Economics Working Papers 649, Department of Economics and Business, Universitat Pompeu Fabra.
  23. 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.
  24. repec:dgr:kubcen:9702 is not listed on IDEAS
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