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It's About Time: Implications of the Period Length in an Equilibrium Search Model

  • Ronald Wolthoff

Empirical evidence suggests that transitions between employment states are highly clustered around the first day of each workweek or each month. Motivated by this observation, I present an equilibrium search model in which the period length is a parameter that determines the degree of clustering. If the period length goes to zero, convergence to a continuous-time model without clustering is obtained. Longer time periods, however, introduce the possibility of recall (or simultaneity) of job offers. In this environment, I show that the period length has a profound effect on the equilibrium outcomes, including the unemployment rate, average unemployment duration, the labor share, the amount of wage dispersion, as well as the shape of the wage density.

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Paper provided by University of Toronto, Department of Economics in its series Working Papers with number tecipa-476.

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Date of creation: 04 Feb 2013
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Handle: RePEc:tor:tecipa:tecipa-476
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