Search Capital

This paper first documents the extent of return employment: workers returning to employers they worked for previously within the same employment spell. Employer returns are typically involuntary and lead to lower earnings. To understand these features, the paper then develops an equilibrium model of worker recall and on-the-job search in which job seekers hold onto information they acquire about job opportunities as insurance in the event of a job destruction shock. Allowing workers to recall contacts increases the probability of a job-to-job transition with the number of jobs previously held during the employment spell while the probability of an job-to-unemployment transition decreases. These transition patterns are consistent with empirical evidence. (Copyright: Elsevier)