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It's About Time: Implications of the Period Length in an Equilibrium Search Model

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  • Ronald Wolthoff

Abstract

Empirical evidence suggests that transitions between employment states are highly clustered around the first day of each workweek or each month. Motivated by this observation, I present an equilibrium search model in which the period length is a parameter that determines the degree of clustering. If the period length goes to zero, convergence to a continuous-time model without clustering is obtained. Longer time periods, however, introduce the possibility of recall (or simultaneity) of job offers. In this environment, I show that the period length has a profound effect on the equilibrium outcomes, including the unemployment rate, average unemployment duration, the labor share, the amount of wage dispersion, as well as the shape of the wage density.

Suggested Citation

  • Ronald Wolthoff, 2013. "It's About Time: Implications of the Period Length in an Equilibrium Search Model," Working Papers tecipa-476, University of Toronto, Department of Economics.
    • Handle: RePEc:tor:tecipa:tecipa-476
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    More about this item

    Keywords

    labor market flows; search frictions; simultaneous search; on-the-job search; wage dispersion; wage mobility; unemployment;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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