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A search model with a quasi network

  • João Miguel Ejarque
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    In a standard search model the expected duration of unemployment is independent of the duration of previous employment, as well as of the current length of the unemployment spell. This paper offers a network mechanism to generate these correlations. Here, employed workers invest in social contacts with other employed workers, which will help them find jobs in the event of unemployment. These social contacts "depreciate" because they can also become unemployed and unemployed contacts are assumed to be useless. In this model the longer you have been working, the more contacts you are likely to have, and the more contacts you have the shorter your expected unemployment duration will be. The model is a simple and tractable way of introducing network ideas in one of the workhorses of labour and macroeconomics. In the model the network is eroded during periods of high unemployment, and is therefore less productive in an absolute sense. Nevertheless, the number of job finders per contact in the unemployment pool increases during periods of high unemployment. Finally, the model provides guidance for indirect inference of network effects from the data.

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    File URL: https://www.economicdynamics.org/meetpapers/2010/paper_597.pdf
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    Paper provided by Society for Economic Dynamics in its series 2010 Meeting Papers with number 597.

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    Date of creation: 2010
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    Handle: RePEc:red:sed010:597
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    1. Krause, Michael U. & Lubik, Thomas A., 2006. "The cyclical upgrading of labor and on-the-job search," Labour Economics, Elsevier, vol. 13(4), pages 459-477, August.
    2. Marcus Hagedorn & Iourii Manovskii, 2008. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies Revisited," American Economic Review, American Economic Association, vol. 98(4), pages 1692-1706, September.
    3. Addison, John T. & Portugal, Pedro, 2001. "Job Search Methods and Outcomes," IZA Discussion Papers 349, Institute for the Study of Labor (IZA).
    4. Dale T. Mortensen, 2005. "More on Unemployment and Vacancy Fluctuations," 2005 Meeting Papers 326, Society for Economic Dynamics.
    5. Petrongolo, Barbara & Pissarides, Christopher, 2000. "Looking Into The Black Box: A Survey Of The Matching Function," CEPR Discussion Papers 2409, C.E.P.R. Discussion Papers.
    6. Russell Cooper & John Haltiwanger & Jonathan L. Willis, 2007. "Implications of Search Frictions: Matching Aggregate and Establishment-level Observations," NBER Working Papers 13115, National Bureau of Economic Research, Inc.
    7. Renato Faccini & Salvador Ortigueira, 2008. "Labor-Market Volatility in the Search-and-Matching Model: The Role of Investment-Specific Technology Shocks," Economics Working Papers ECO2008/39, European University Institute.
    8. Montgomery, James D, 1991. "Social Networks and Labor-Market Outcomes: Toward an Economic Analysis," American Economic Review, American Economic Association, vol. 81(5), pages 1407-18, December.
    9. Larsen, Birthe, 2001. "Minimum wages, technological progress and loss of skill," European Economic Review, Elsevier, vol. 45(8), pages 1521-1544, August.
    10. Robert E. Hall, 2005. "Employment Fluctuations with Equilibrium Wage Stickiness," American Economic Review, American Economic Association, vol. 95(1), pages 50-65, March.
    11. Luca P. Merlino Autonoma & Andrea Galeotti, 2009. "Endogenous job contact networks," 2009 Meeting Papers 133, Society for Economic Dynamics.
    12. Mortensen, Dale T & Pissarides, Christopher A, 1994. "Job Creation and Job Destruction in the Theory of Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 397-415, July.
    13. Addison, John T & Portugal, Pedro, 1989. "Job Displacement, Relative Wage Changes, and Duration of Unemployment," Journal of Labor Economics, University of Chicago Press, vol. 7(3), pages 281-302, July.
    14. Antoni Calvó-Armengol & Matthew O. Jackson, 2003. "Networks in Labor Markets: Wage and Employment Dynamics and Inequality," Working Papers 55, Barcelona Graduate School of Economics.
    15. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
    16. Pissarides, Christopher A, 1985. "Short-run Equilibrium Dynamics of Unemployment Vacancies, and Real Wages," American Economic Review, American Economic Association, vol. 75(4), pages 676-90, September.
    17. Pissarides, Christopher A, 1992. "Loss of Skill during Unemployment and the Persistence of Employment Shocks," The Quarterly Journal of Economics, MIT Press, vol. 107(4), pages 1371-91, November.
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