Due Diligence: Job Search with Rationally Inattentive Workers

Daniel Martin, Christopher Tonetti, Andrew Caplin and Joseph Briggs ()
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Andrew Caplin: New York University

No 287, 2015 Meeting Papers from Society for Economic Dynamics

Abstract: We develop a model of late in life job search that accounts for end of life labor force exit and re-entry. Our key assumptions are that job offers consist of both wage and complex non-wage characteristics and that older workers care more about the non-wage characteristics of a job. In equilibrium, young workers choose jobs with high wages, but poor non-wage characteristics, while older workers are willing to trade off lower wages for better non-wage characteristics. However, due to rational inattention, older workers may ex-post regrettably accept low wage jobs with poor non-wage characteristics. Such mistakes produce welfare losses and generate employment patterns in the model consistent with the empirical patterns of older US workers.

Date: 2015
New Economics Papers: this item is included in nep-age, nep-dge and nep-ltv
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed015:287

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