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Asset Accumulation and Short Term Employment

Author

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  • Martin Browning

    (Institute of Economics, University of Copenhagen)

  • Thomas F. Crossley

    (McMaster University)

  • Eric Smith

    (University of Essex)

Abstract

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.

Suggested Citation

  • Martin Browning & Thomas F. Crossley & Eric Smith, 2003. "Asset Accumulation and Short Term Employment," CAM Working Papers 2003-02, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
  • Handle: RePEc:kud:kuieca:2003_02
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    Cited by:

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    2. Emin Dinlersoz & Henry Hyatt & Hubert Janicki, 2019. "Who Works for Whom? Worker Sorting in a Model of Entrepreneurship with Heterogeneous Labor Markets," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 34, pages 244-266, October.
    3. Flórez, Luz A., 2017. "Informal sector under saving: A positive analysis of labour market policies," Labour Economics, Elsevier, vol. 44(C), pages 13-26.
    4. Bart Cockx & Matteo Picchio, 2012. "Are Short-lived Jobs Stepping Stones to Long-Lasting Jobs?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 74(5), pages 646-675, October.
    5. Yan Ji, 2017. "Job Search under Debt: Aggregate Implications of Student Loans," 2017 Meeting Papers 222, Society for Economic Dynamics.
    6. Matteo Picchio & Mattia Filomena, 2021. "Are Temporary Jobs Stepping Stones Or Dead Ends? A Meta-Analytical Review Of The Literature," Working Papers 455, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    7. Jeremy Lise, 2006. "On-the-Job Search and Precautionary Savings: Theory and Empirics of Earnings and Wealth Inequality," 2006 Meeting Papers 137, Society for Economic Dynamics.
    8. Tricia Gladden & Michelle Alexopoulos, 2004. "The Effects of Wealth, and Unemployment Benefits on Search Behavior and Labor Market Transitions," Econometric Society 2004 North American Summer Meetings 517, Econometric Society.
    9. Guler, Bulent & Guvenen, Fatih & Violante, Giovanni L., 2012. "Joint-search theory: New opportunities and new frictions," Journal of Monetary Economics, Elsevier, vol. 59(4), pages 352-369.
    10. Uren, Lawrence, 2018. "The redistributive role of unemployment benefits," Journal of Economic Dynamics and Control, Elsevier, vol. 90(C), pages 236-258.
    11. Emin Dinlersoz & Henry Hyatt & Hubert Janicki, 2019. "Who Works for Whom? Worker Sorting in a Model of Entrepreneurship with Heterogeneous Labor Markets," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 34, pages 244-266, October.
    12. Wolff, Joachim & Nivorozhkin, Anton, 2008. "Start me up: The effectiveness of a self-employment programme for needy unemployed people in Germany," IAB-Discussion Paper 200820, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    13. Luz Adriana Flórez, 2014. "Optimal Policy with Informal Sector and Endogenous Savings," Borradores de Economia 833, Banco de la Republica de Colombia.
    14. Jeremy Lise, 2013. "On-the-Job Search and Precautionary Savings," Review of Economic Studies, Oxford University Press, vol. 80(3), pages 1086-1113.
    15. Jahn, Elke J. & Rosholm, Michael, 2014. "Looking beyond the bridge: The effect of temporary agency employment on labor market outcomes," European Economic Review, Elsevier, vol. 65(C), pages 108-125.
    16. Simon Franklin, 2015. "Location, search costs and youth unemployment: A randomized trial of transport subsidies in Ethiopia," CSAE Working Paper Series 2015-11, Centre for the Study of African Economies, University of Oxford.
    17. Richard Rogerson & Robert Shimer & Randall Wright, 2004. "Search-Theoretic Models of the Labor Market-A Survey," NBER Working Papers 10655, National Bureau of Economic Research, Inc.

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    More about this item

    Keywords

    unemployment; search; consumption; assets;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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