series: TI 03-032/2
Lifetime Labor Supply in a Search Model of Unemployment
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This paper investigates the age-dependency of participation and unemployment by integrating job search with intertemporal optimizing behavior of finitely-lived households. We find that search frictions and tax rates distort the decisions of older workers to a much larger extent than that of young workers. This finding provides an explanation of the observed fall of participation rates of elder workers as a result of the post-war increase in tax rates and replacement rates. We show that the age pattern of search unemployment does not match observed unemployment and we propose a new concept of 'voluntary' unemployment that agrees well with observations.
- J64 : Unemployment: Models, Duration, Incidence, and Job Search
- D91 : Intertemporal Consumer Choice; Life Cycle Models and Saving
- J31 : Wage Level and Structure; Wage Differentials by Skill, Training, Occupation, etc.
- job value
- labor supply
- replacement rate
- labor market