Wealth accumulation, on-the-job search and inequality

Gaston Chaumont and Shouyong Shi

Journal of Monetary Economics, 2022, vol. 128, issue C, 51-71

Abstract: We study a directed search equilibrium with risk-averse workers who can search on the job and accumulate non-contingent assets under a borrowing limit. Search outcomes affect earnings and wealth accumulation. In turn, wealth and earnings affect search decisions by changing the optimal trade-off between the wage and the matching probability. The interaction between search and wealth provides important self-insurance. The calibrated model yields significant wage inequality as measured by the mean-min ratio in wages. We analyze the dynamic welfare effects of changes in unemployment insurance and find a relatively limited role for unemployment insurance as self-insurance significantly reduces consumption risk.

Keywords: Wealth accumulation; On-the-job search; Inequality; Directed search (search for similar items in EconPapers)
JEL-codes: E21 E24 J60 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Wealth Accumulation, On the Job Search and Inequality (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:128:y:2022:i:c:p:51-71

DOI: 10.1016/j.jmoneco.2022.03.009

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