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Life-Cycle Labor Search with Stochastic Match Quality

Author

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  • Julen Esteban-Pretel

    (National Graduate Institute for Policy Studies)

  • Junichi Fujimoto

    (Faculty of Economics, University of Tokyo)

Abstract

Unemployment, job finding, and job separation rates exhibit patterns of decline as worker age increases in the U.S. We build and numerically simulate a search and matching model of the labor market that incorporates a life-cycle structure to account for these empirical facts. The model features random match quality, which, with positive probability, is not revealed until production takes place. We show that the model, calibrated to U.S. data, is able to reproduce the empirical patterns of unemployment and job transition rates over the entire life-cycle. Both decreasing distance to retirement as a worker ages, and ex ante unknown match quality, are essential in delivering these results. We then explore, both analytically and numerically, the efficiency implications of the model.

Suggested Citation

  • Julen Esteban-Pretel & Junichi Fujimoto, 2011. "Life-Cycle Labor Search with Stochastic Match Quality," CIRJE F-Series CIRJE-F-783, CIRJE, Faculty of Economics, University of Tokyo.
  • Handle: RePEc:tky:fseres:2010cf783
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Life-Cycle Labor Search with Stochastic Match Quality
      by Christian Zimmermann in NEP-DGE blog on 2011-02-03 07:48:35

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    Cited by:

    1. Jung, Philip & Kuhn, Moritz, 2012. "Earnings losses and labor mobility over the life-cycle," MPRA Paper 40287, University Library of Munich, Germany.
    2. Guido Menzio & Irina Telyukova & Ludo Visschers, 2016. "Directed Search over the Life Cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 19, pages 38-62, January.
    3. Hairault, Jean-Olivier & Langot, François & Zylberberg, André, 2015. "Equilibrium unemployment and retirement," European Economic Review, Elsevier, vol. 79(C), pages 37-58.
    4. Julen ESTEBAN-PRETEL & FUJIMOTO Junichi, 2011. "Life-Cycle Search, Match Quality and Japan's Labor Flow," Discussion papers 11041, Research Institute of Economy, Trade and Industry (RIETI).
    5. Gorry, Aspen, 2013. "Minimum wages and youth unemployment," European Economic Review, Elsevier, vol. 64(C), pages 57-75.
    6. Gervais, Martin & Jaimovich, Nir & Siu, Henry E. & Yedid-Levi, Yaniv, 2016. "What should I be when I grow up? Occupations and unemployment over the life cycle," Journal of Monetary Economics, Elsevier, vol. 83(C), pages 54-70.
    7. Ludo Visschers & Carlos Carrillo-Tudela, 2011. "Unemployment and Endogenous Reallocation over the Business Cycle," 2011 Meeting Papers 1101, Society for Economic Dynamics.
    8. Fujimoto, Junichi, 2013. "A note on the life-cycle search and matching model with segmented labor markets," Economics Letters, Elsevier, vol. 121(1), pages 48-52.
    9. Arifur Rahman, 2018. "Equitable Redistribution without Taxation: A lesson from East Asian Miracle countries," LIS Working papers 726, LIS Cross-National Data Center in Luxembourg.
    10. Esteban-Pretel, Julen & Fujimoto, Junichi, 2012. "Life-cycle search, match quality and Japan’s labor market," Journal of the Japanese and International Economies, Elsevier, vol. 26(3), pages 326-350.

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