Directed Search on the Job, Heterogeneity, and Aggregate Fluctuations

Guido Menzio and Shouyong Shi

Working Papers from University of Toronto, Department of Economics

Abstract: We study a labor market where workers search for jobs both on the job and off the job. In the model, there are aggregate productivity shocks and match-specific shocks. We outline the proof of existence of an equilibrium which we call a block recursive equilibrium (BRE), in which individuals' decisions and market tightness are independent of the distribution of workers over wages or contracts. A critical assumption that is responsible for a BRE to exist is that search is directed by firms' posting of contracts. We explain why a BRE does exist under the assumption of directed search and why it does not under the assumption of random search. Finally, we generalize the proof of existence of a BRE to allow workers to be ex-ante heterogeneous with respect to some observable characteristics such as education and skill.

Keywords: Directed Search; On the Job Search; Heterogeneity; Aggregate Fluctuations (search for similar items in EconPapers)
JEL-codes: E24 E32 J64 (search for similar items in EconPapers)
Pages: 8 pages
Date: 2010-01-21
New Economics Papers: this item is included in nep-bec, nep-dge, nep-lab and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (46)

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Journal Article: Directed Search on the Job, Heterogeneity, and Aggregate Fluctuations (2010)
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