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Directed search over the life cycle

  • Ludo Visschers

    (Carlos III)

  • Irina Telyukova

    (UCSD)

  • Guido Menzio

    (UPenn)

How much of a worker's lifetime experience in the labor market is due to human capital accumulation versus luck? We build a life-cycle model of directed search in the labor market, in which workers move between the states of unemployment, employment and across employers because of differences in labor market experience and in idiosyncratic productivity of different rm-worker matches. We calibrate the model to age-independent facts based on the SIPP, and find that it is able to match key life-cycle facts in the labor market, including the rates of transition between labor market states by age and the average age-earnings profile. Using the model, we then decompose the life-cycle profiles of wages and transitions into human capital effects, age-related horizon effects and search effects. We find that search frictions play a very important role in the workers' life-cycle experience

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Paper provided by Society for Economic Dynamics in its series 2011 Meeting Papers with number 1360.

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Date of creation: 2011
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Handle: RePEc:red:sed011:1360
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