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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.

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File URL: http://www.econ.upf.edu/docs/papers/downloads/649.pdf
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Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 649.

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Date of creation: Oct 2002
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Handle: RePEc:upf:upfgen:649
Contact details of provider: Web page: http://www.econ.upf.edu/

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