On-the-Job Search and Labor Market Equilibrium

Roberto Bonilla and Kenneth Burdett

The B.E. Journal of Macroeconomics, 2010, vol. 10, issue 1, 28

Abstract: On-the-job search is something we all do from time to time. Indeed, a significant percentage of job changes made by workers involves no interim unemployment. The object of the study is to develop and analyze a labor market model where unemployed workers and firms bargain over the wage paid if employment is accepted. Any employed worker can choose to search for another job but only at a cost. It will be shown that in such an environment the bargaining set is not convex. Nevertheless, utilizing a strategic bargaining game we show there is a unique bargaining outcome which may involve a lottery. The resulting market equilibrium exists and if the cost of search is low enough the resulting equilibrium is where some employees search on-the-job even in the case where both workers and firms are homogeneous.

Keywords: search; equilibrium (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (9)

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DOI: 10.2202/1935-1690.1985

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