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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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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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  7. Jacobson, Louis S & LaLonde, Robert J & Sullivan, Daniel G, 1993. "Earnings Losses of Displaced Workers," American Economic Review, American Economic Association, vol. 83(4), pages 685-709, September.
  8. 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.
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  16. 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.
  17. Hans Bloemen & Elena Stancanelli, 2001. "Individual Wealth, Reservation Wages, and Transitions into Employment," Post-Print hal-01017002, HAL.
  18. Martin Browning & Thomas Crossley, 1996. "Unemployment Insurance Benefit Levels and Consumption Changes," Discussion Papers 96-11, University of Copenhagen. Department of Economics.
  19. Robert H. Topel & Michael P. Ward, 1992. "Job Mobility and the Careers of Young Men," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 439-479.
  20. Harry J. Holzer, 1987. "Job Search by Employed and Unemployed Youth," ILR Review, Cornell University, ILR School, vol. 40(4), pages 601-611, July.
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  22. James Costain, 1997. "Unemployment insurance with endogenous search intensity and precautionary saving," Economics Working Papers 243, Department of Economics and Business, Universitat Pompeu Fabra.
  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.
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