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Search and Matching in the Labor Market without Unemployment Insurance

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  • Francesc Obiols-Homs

Abstract

I study the effect of the market arrangement on competitive allocations in a model in which the distribution of idiosyncratic uncertainty is determined endogenously. The particular application I consider is a search model of the labor market embedded in a general equilibrium model with production and asset accumulation. It is shown that costly search with incomplete markets introduces a wealth effect at low levels of wealth such that poor agents do not search much or even find optimal not to look for a job. The combination of this effect with the usual one at higher wealth levels delivers equilibrium allocations that are remarkably different from the one that obtains under complete markets. I also use numerical methods to obtain quantitative predictions in a calibrated version of the model. The effect of the market arrangement remains dramatically large due to search externalities.

Suggested Citation

  • Francesc Obiols-Homs, 2012. "Search and Matching in the Labor Market without Unemployment Insurance," Working Papers 670, Barcelona School of Economics.
    • Handle: RePEc:bge:wpaper:670
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    References listed on IDEAS

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    More about this item

    Keywords

    search; incomplete markets; general equilibrium;
    All these keywords.

    JEL classification:

    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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