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Household Search and the Aggregate Labor Market

Jochen Mankart and Rigas Oikonomou

No 1225, Economics Working Paper Series from University of St. Gallen, School of Economics and Political Science

Abstract: Sharing risks is one of the essential economic roles of families. The importance of this role increases in the amount of uncertainty that households face in the labor market and in the degree of incompleteness of financial markets. We develop a theory of joint household search in frictional labor markets under incomplete financial markets. Households can insure themselves by savings and by timing their labor market participation. We show that this theory can match one aspect of the US data that conventional search models, which do not incorporate joint household search, cannot match. In the data, aggregate employment is pro-cyclical and unemployment counter-cyclical, but their sum, the labor force, is acyclical. In our model, and in the US data, when a family member loses his job in a recession, the other family member joins the labor force to provide insurance.

Keywords: Heterogeneous Agents; Family Self Insurance; Labor Market Search; Aggregate Fluctuations (search for similar items in EconPapers)
JEL-codes: E24 E25 E32 J10 J64 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2012-12
New Economics Papers: this item is included in nep-dge, nep-ias, nep-lab and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Related works:
Journal Article: Household Search and the Aggregate Labour Market (2017) Downloads
Working Paper: Household search and the aggregate labor market (2015) Downloads
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