IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Job search and asset accumulation under borrowing constraints

  • Silvio Rendon

In this paper I show how borrowing constraints and job search interact. I fit a dynamic model to data from the National Longitudinal Survey (1979-cohort) and show that borrowing constraints are significant. Agents with more initial assets and more access to credit attain higher wages for several periods after high school graduation. The unemployed maintain their consumption by running down their assets, while the employed save to buffer against future unemployment spells. I also show that, unlike in models with exogenous income streams, unemployment transfers, by allowing agents to attain higher wages do not 'crowd out' but increase saving.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
File Function: Whole Paper
Download Restriction: no

Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 649.

in new window

Date of creation: Oct 2002
Date of revision:
Handle: RePEc:upf:upfgen:649
Contact details of provider: Web page:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Gruber, Jonathan, 1997. "The Consumption Smoothing Benefits of Unemployment Insurance," American Economic Review, American Economic Association, vol. 87(1), pages 192-205, March.
  2. Hopenhayn, Hugo A & Nicolini, Juan Pablo, 1997. "Optimal Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 412-38, April.
  3. James Costain, 1997. "Unemployment insurance with endogenous search intensity and precautionary saving," Economics Working Papers 243, Department of Economics and Business, Universitat Pompeu Fabra.
  4. Jonathan Gruber, 1994. "The Consumption Smoothing Benefits of Unemployment Insurance," NBER Working Papers 4750, National Bureau of Economic Research, Inc.
  5. Eric M. Engen & Jonathan Gruber, 1995. "Unemployment Insurance and Precautionary Saving," NBER Working Papers 5252, National Bureau of Economic Research, Inc.
  6. Hansen, Gary D & Imrohoroglu, Ayse, 1992. "The Role of Unemployment Insurance in an Economy with Liquidity Constraints and Moral Hazard," Journal of Political Economy, University of Chicago Press, vol. 100(1), pages 118-42, February.
  7. Engen, Eric M. & Gruber, Jonathan, 2001. "Unemployment insurance and precautionary saving," Journal of Monetary Economics, Elsevier, vol. 47(3), pages 545-579, June.
  8. Yann Algan & Arnaud Cheron & Jean-Olivier Hairault & Francois Langot, 2003. "Wealth Effect on Labor Market Transitions," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(1), pages 156-178, January.
  9. Angus Deaton, 1989. "Saving and Liquidity Constraints," NBER Working Papers 3196, National Bureau of Economic Research, Inc.
  10. John Rust, 1989. "Behavior of male workers at the end of the life-cycle: an empirical analysis of states and controls," Discussion Paper / Institute for Empirical Macroeconomics 6, Federal Reserve Bank of Minneapolis.
  11. Kiefer, Nicholas M & Neumann, George R, 1979. "An Empirical Job-Search Model, with a Test of the Constant Reservation-Wage Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 87(1), pages 89-107, February.
  12. James J. Heckman & Christopher J. Flinn, 1982. "New Methods for Analyzing Structural Models of Labor Force Dynamics," NBER Working Papers 0856, National Bureau of Economic Research, Inc.
  13. Pissarides, Christopher, 2002. "Consumption and Savings with Unemployment Risk: Implications for Employment Contracts," CEPR Discussion Papers 3367, C.E.P.R. Discussion Papers.
  14. Marimon, Ramon & Zilibotti, Fabrizio, 1999. "Unemployment vs. Mismatch of Talents: Reconsidering Unemployment Benefits," Economic Journal, Royal Economic Society, vol. 109(455), pages 266-91, April.
  15. Rasmus Lenz & Torben Tranæs, . "Job Search and Savings: Wealth Effects and Duration Dependence," EPRU Working Paper Series 01-10, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  16. Christopher J. Flinn & James J. Heckman, 1982. "Models for the Analysis of Labor Force Dynamics," NBER Working Papers 0857, National Bureau of Economic Research, Inc.
  17. Christopher D. Carroll, 1992. "The Buffer-Stock Theory of Saving: Some Macroeconomic Evidence," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(2), pages 61-156.
  18. Hubbard, R Glenn & Skinner, Jonathan & Zeldes, Stephen P, 1995. "Precautionary Saving and Social Insurance," Journal of Political Economy, University of Chicago Press, vol. 103(2), pages 360-99, April.
  19. Flemming, J. S., 1978. "Aspects of optimal unemployment insurance : Search, leisure, savings and capital market imperfections," Journal of Public Economics, Elsevier, vol. 10(3), pages 403-425, December.
  20. Engelhardt Gary V., 1994. "House Prices and the Decision to Save for Down Payments," Journal of Urban Economics, Elsevier, vol. 36(2), pages 209-237, September.
  21. Lippman, Steven A & McCall, John J, 1976. "The Economics of Job Search: A Survey," Economic Inquiry, Western Economic Association International, vol. 14(3), pages 347-68, September.
  22. Daron Acemoglu & Robert Shimer, 1998. "Efficient Unemployment Insurance," NBER Working Papers 6686, National Bureau of Economic Research, Inc.
  23. Dale Mortensen, 1984. "Job Search and Labor Market Analysis," Discussion Papers 594, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  24. Hamermesh, Daniel S, 1982. "Social Insurance and Consumption: An Empirical Inquiry," American Economic Review, American Economic Association, vol. 72(1), pages 101-13, March.
  25. Francine D. Blau & John W. Graham, 1989. "Black-White Differences in Wealth and Asset Composition," NBER Working Papers 2898, National Bureau of Economic Research, Inc.
  26. Jonathan S. Skinner, 1987. "Risky Income, Life Cycle Consumption, and Precautionary Savings," NBER Working Papers 2336, National Bureau of Economic Research, Inc.
  27. Nancy Jianakoplos & Paul Menchik & Owen Irvine, 1989. "Using Panel Data to Assess the Bias in Cross-sectional Inferences of Life-Cycle Changes in the Level and Composition of Household Wealth," NBER Chapters, in: The Measurement of Saving, Investment, and Wealth, pages 553-644 National Bureau of Economic Research, Inc.
  28. Joao Gomes & Jeremy Greenwood & Sergio T. Rebelo, 2001. "Equilibrium Unemployment," RCER Working Papers 479, University of Rochester - Center for Economic Research (RCER).
  29. Bloemen, Hans G & Stancanelli, Elena G F, 2001. "Individual Wealth, Reservation Wages, and Transitions into Employment," Journal of Labor Economics, University of Chicago Press, vol. 19(2), pages 400-439, April.
  30. Hayashi, Fumio, 1985. "The Effect of Liquidity Constraints on Consumption: A Cross-sectional Analysis," The Quarterly Journal of Economics, MIT Press, vol. 100(1), pages 183-206, February.
  31. John Y. Campbell & N. Gregory Mankiw, 1989. "Consumption, Income, and Interest Rates: Reinterpreting the Time Series Evidence," NBER Working Papers 2924, National Bureau of Economic Research, Inc.
  32. Sobol, Marion Gross, 1979. "Factors Influencing Private Capital Accumulation on the "Eve of Retirement"," The Review of Economics and Statistics, MIT Press, vol. 61(4), pages 585-93, November.
  33. Robert E. Hall & Frederic S. Mishkin, 1980. "The Sensitivity of Consumption to Transitory Income: Estimates from Panel Data on Households," NBER Working Papers 0505, National Bureau of Economic Research, Inc.
  34. Heckman, James J & Macurdy, Thomas E, 1980. "A Life Cycle Model of Female Labour Supply," Review of Economic Studies, Wiley Blackwell, vol. 47(1), pages 47-74, January.
  35. Meyer, Bruce D, 1990. "Unemployment Insurance and Unemployment Spells," Econometrica, Econometric Society, vol. 58(4), pages 757-82, July.
  36. MaCurdy, Thomas E, 1981. "An Empirical Model of Labor Supply in a Life-Cycle Setting," Journal of Political Economy, University of Chicago Press, vol. 89(6), pages 1059-85, December.
  37. Zvi Eckstein & Kenneth I. Wolpin, 1989. "The Specification and Estimation of Dynamic Stochastic Discrete Choice Models: A Survey," Journal of Human Resources, University of Wisconsin Press, vol. 24(4), pages 562-598.
  38. Miller, Bruce L, 1974. "Optimal Consumption with a Stochastic Income Stream," Econometrica, Econometric Society, vol. 42(2), pages 253-66, March.
  39. Hakansson, Nils H, 1970. "Optimal Investment and Consumption Strategies Under Risk for a Class of Utility Functions," Econometrica, Econometric Society, vol. 38(5), pages 587-607, September.
  40. Wolff, Edward N., 1990. "Methodological issues in the estimation of the size distribution of household wealth," Journal of Econometrics, Elsevier, vol. 43(1-2), pages 179-195.
  41. Dynarski, Mark & Sheffrin, Steven M, 1987. "Consumption and Unemployment," The Quarterly Journal of Economics, MIT Press, vol. 102(2), pages 411-28, May.
  42. Evans, David S & Jovanovic, Boyan, 1989. "An Estimated Model of Entrepreneurial Choice under Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 808-27, August.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:upf:upfgen:649. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.