IT'S ABOUT TIME: IMPLICATIONS OF THE PERIOD LENGTH IN AN EQUILIBRIUM SEARCH MODEL

2014/07/28 by Ronald Wolthoff
Economics, Econometrics and Finance · #Labor market dynamics and wage inequality #Economic theories and models #Firm Innovation and Growth

paper · doi:10.1111/iere.12073

Abstract

Empirical evidence suggests that transitions between employment states are highly clustered around the first day of each workweek or month. I analyze the effect of this phenomenon by presenting an equilibrium search model in which the period length is a parameter determining the degree of clustering. Infinitesimally short periods result in a continuous-time model with bilateral meetings, whereas longer time periods introduce the possibility of recall or simultaneity of job offers. In this environment, I show that the period length has a profound effect on equilibrium outcomes, including the unemployment rate, unemployment duration, and the cross-sectional wage distribution.

Citations

• Is Unemployment Really Scarring? Effects of Unemployment Experiences on Wages
• Wage Differentials, Employer Size, and Unemployment

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