Directed search over the life cycle Articles uri icon

authors

  • MENZIO, GUIDO
  • TELYUKOVA, IRINA A.
  • VISSCHERS, LODEWIJK PIETER

publication date

  • January 2016

start page

  • 38

end page

  • 62

volume

  • 19

International Standard Serial Number (ISSN)

  • 1094-2025

Electronic International Standard Serial Number (EISSN)

  • 1096-6099

abstract

  • We develop a life-cycle model of the labor market in which different worker-firm matches have different quality and the assignment of the right workers to the right firms is time consuming because of search and learning frictions. The rate at which workers move between unemployment, employment and across different firms is endogenous because search is directed and, hence, workers can choose whether to seek low-wage jobs that are easy to find or high-wage jobs that are hard to find. We calibrate our theory using data on labor market transitions aggregated across workers of different ages. We validate our theory by showing that it predicts quite well the pattern of labor market transitions for workers of different ages. Finally, we use our theory to decompose the age profiles of transition rates, wages and productivity into the effects of age variation in work-life expectancy, human capital and match quality. (C) 2015 Elsevier Inc. All rights reserved.

keywords

  • equilibrium wage dispersion; unemployment; job; heterogeneity; differentials; vacancies; dynamics; tenure; model; directed search; labor reallocation; lifecycle