An Equilibrium Theory of Learning, Search, and Wages

Francisco Gonzalez () and Shouyong Shi

Econometrica, 2010, vol. 78, issue 2, 509-537

Abstract: We examine the labor market effects of incomplete information about the workers' own job-finding process. Search outcomes convey valuable information, and learning from search generates endogenous heterogeneity in workers' beliefs about their job-finding probability. We characterize this process and analyze its interactions with job creation and wage determination. Our theory sheds new light on how unemployment can affect workers' labor market outcomes and wage determination, providing a rational explanation for discouragement as the consequence of negative search outcomes. In particular, longer unemployment durations are likely to be followed by lower reemployment wages because a worker's beliefs about his job-finding process deteriorate with unemployment duration. Moreover, our analysis provides a set of useful results on dynamic programming with optimal learning. Copyright 2010 The Econometric Society.

Date: 2010
References: Add references at CitEc
Citations: View citations in EconPapers (55)

Downloads: (external link)
http://hdl.handle.net/10.3982/ECTA8061 link to full text (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: An Equilibrium Theory of Learning, Search and Wages (2009)
Working Paper: An Equilibrium Theory of Learning, Search and Wages (2009)
Working Paper: An Equilibrium Theory of Learning, Search and Wages (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecm:emetrp:v:78:y:2010:i:2:p:509-537

Ordering information: This journal article can be ordered from
https://www.economet ... ordering-back-issues

Access Statistics for this article

Econometrica is currently edited by Guido Imbens

More articles in Econometrica from Econometric Society Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().