Lifetime Labor Supply in a Search Model of Unemployment

Leon J.H. Bettendorf () and Peter Broer ()
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Leon J.H. Bettendorf: OCFEB, Erasmus University Rotterdam

No 03-032/2, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: 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.

Keywords: search frictions; labor supply; life cycle; unemployment; retirement. (search for similar items in EconPapers)
JEL-codes: J64 D91 J31 (search for similar items in EconPapers)
Date: 2003-04-09
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Persistent link: http://EconPapers.repec.org/RePEc:dgr:uvatin:20030032

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