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Wealth effect on labor market transitions

Author

Listed:
  • Yann Algan

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Arnaud Chéron

    (GAINS - Groupe d'Analyse des Itinéraires et des Niveaux Salariaux - UM - Le Mans Université, CEPREMAP - Centre pour la recherche économique et ses applications - ECO ENS-PSL - Département d'économie de l'ENS-PSL - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres)

  • Jean-Olivier Hairault

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, CEPREMAP - Centre pour la recherche économique et ses applications - ECO ENS-PSL - Département d'économie de l'ENS-PSL - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres)

  • François Langot

    (GAINS - Groupe d'Analyse des Itinéraires et des Niveaux Salariaux - UM - Le Mans Université, CEPREMAP - Centre pour la recherche économique et ses applications - ECO ENS-PSL - Département d'économie de l'ENS-PSL - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres)

Abstract

Does wealth matter for labor market transitions? This paper aims at giving a quantitative answer to this question. Econometric reduced-form estimates on French panel data provide evidence of a significant wealth effect on the extensive margin of labor supply. Both unemployment duration and job quits rise with holdings of short-term liquid assets. This evidence gives support to the recent development of quantitative dynamic equilibrium search models incorporating precautionary savings. We consider such a model calibrated on French data and focus on the role of the option value of search and the disutility of working. In addition, we pay attention to the important interaction between the intensive and the extensive margins of labor supply.

Suggested Citation

  • Yann Algan & Arnaud Chéron & Jean-Olivier Hairault & François Langot, 2003. "Wealth effect on labor market transitions," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-03637025, HAL.
    • Handle: RePEc:hal:cesptp:hal-03637025
    DOI: 10.1016/S1094-2025(02)00013-3
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Labor market transitions; Panel data; Job search theory; Incomplete markets; Savings;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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