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Lifetime Labor Supply in a Search Model of Unemployment

Author

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  • Leon J.H. Bettendorf

    (OCFEB, Erasmus University Rotterdam)

  • D. Peter Broer

    (OCFEB, Erasmus University Rotterdam)

Abstract

This paper investigates the age-dependency of participation andunemployment by integrating job search with intertemporal optimizing behaviorof finitely-lived households. We find that search frictions and tax ratesdistort the decisions of older workers to a much larger extent than that ofyoung workers. This finding provides an explanation of the observed fall ofparticipation rates of elder workers as a result of the post-war increase intax rates and replacement rates. We show that the age pattern of searchunemployment does not match observed unemployment and we propose a new conceptof 'voluntary' unemployment that agrees well with observations.

Suggested Citation

  • Leon J.H. Bettendorf & D. Peter Broer, 2003. "Lifetime Labor Supply in a Search Model of Unemployment," Tinbergen Institute Discussion Papers 03-032/2, Tinbergen Institute.
  • Handle: RePEc:tin:wpaper:20030032
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    References listed on IDEAS

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    5. James Costain, 1997. "Unemployment insurance with endogenous search intensity and precautionary saving," Economics Working Papers 243, Department of Economics and Business, Universitat Pompeu Fabra.
    6. Heer, Burkhard, 1997. "Unemployment Insurance versus Welfare Payments: A Dynamic CGE Analysis of Employment and Welfare Effects," Public Finance = Finances publiques, , vol. 52(3-4), pages 367-393.
    7. Casey B. Mulligan, 1999. "Substition over Time: Another Look at Life-Cycle Labor Supply," NBER Chapters, in: NBER Macroeconomics Annual 1998, volume 13, pages 75-152, National Bureau of Economic Research, Inc.
    8. A. B. Atkinson, 1999. "The Economic Consequences of Rolling Back the Welfare State," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262011719.
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    10. Donald A. Walker (ed.), 2000. "Equilibrium," Books, Edward Elgar Publishing, volume 0, number 1585, June.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Jean-Olivier Hairault & François Langot & Thepthida Sopraseuth, 2010. "Distance to Retirement and The Job Search of Older Workers: The Case For Delaying Retirement Age," Post-Print hal-00517107, HAL.
    2. Anna Batyra & David de la Croix & Olivier Pierrard & Henri Sneessens, 2016. "Structural changes in the labor market and the rise of early retirement in Europe," DEM Discussion Paper Series 16-13, Department of Economics at the University of Luxembourg.
    3. Arnaud Chéron & Jean-Olivier Hairault & François Langot, 2013. "Life-Cycle Equilibrium Unemployment," Journal of Labor Economics, University of Chicago Press, vol. 31(4), pages 843-882.
    4. Berangere Legendre & Annaig-C. Pedrant & Mareva Sabatier, 2018. "Should I stay or should I go? An econometric analysis of retirement decisions by couples," Applied Economics, Taylor & Francis Journals, vol. 50(53), pages 5814-5829, November.
    5. Jean-Olivier Hairault & Francois Langot & Arnaud Cheron, 2007. "Job creation and job destruction over the life cycle," 2007 Meeting Papers 431, Society for Economic Dynamics.
    6. Laetitia Challe & Florent Fremigacci & François Langot & Yannick l'Horty & Loic Du Parquet & Pascale Petit, 2015. "Access to employment with age and gender : results of a controlled experiment," Working Papers hal-01292137, HAL.
    7. Mareva Sabatier & Bérangère Legendre, 2017. "The puzzle of older workers’ employment: distance to retirement and health effects," International Journal of Manpower, Emerald Group Publishing, vol. 38(1), pages 45-61, April.
    8. Sarah Le Duigou & Pierre-Jean Messe, 2017. "Pension reforms, older workers' employment and the role of job separation and finding rates in France," TEPP Working Paper 2017-10, TEPP.
    9. Stefan Boeters, 2014. "Age-Specific Labour Market Effects of Employment Protection - A numerical approach," CPB Discussion Paper 281.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    10. Stefan Boeters, 2016. "Age-Specific Labour Market Effects of Employment Protection: A Numerical Approach," Computational Economics, Springer;Society for Computational Economics, vol. 48(2), pages 281-305, August.
    11. Stefan Boeters, 2016. "Age-Specific Labour Market Effects of Employment Protection: A Numerical Approach," Computational Economics, Springer;Society for Computational Economics, vol. 48(2), pages 281-305, August.
    12. Batyra, Anna & de la Croix, David & Pierrard, Olivier & Sneessens, Henri R., 2013. "Declining bargaining power of workers and the rise of early retirement in Europe," GIAM Working Papers 13-6, Galatasaray University Economic Research Center.

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    More about this item

    Keywords

    search frictions; labor supply; life cycle; unemployment; retirement.;
    All these keywords.

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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