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Block recursive equilibria for stochastic models of search on the job

Guido Menzio and Shouyong Shi

Journal of Economic Theory, 2010, vol. 145, issue 4, 1453-1494

Abstract: We develop a general stochastic model of directed search on the job. Directed search allows us to focus on a Block Recursive Equilibrium (BRE) where agents' value functions, policy functions and market tightness do not depend on the distribution of workers over wages and unemployment. We formally prove existence of a BRE under various specifications of workers' preferences and contractual environments, including dynamic contracts and fixed-wage contracts. Solving a BRE is as easy as solving a representative agent model, in contrast to the analytical and computational difficulties in models of random search on the job.

Keywords: Directed; search; On-the-job; search; Heterogeneity; Aggregate; fluctuations (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (165)

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Related works:
Working Paper: Block Recursive Equilibria for Stochastic Models of Search on the Job (2009) Downloads
Working Paper: Block Recursive Equilibria for Stochastic Models of Search on the Job (2009) Downloads
Working Paper: Block Recursive Equilibria for Stochastic Models of Search on the Job (2009) Downloads
Working Paper: Block Recursive Equilibria for Stochastic Models of Search on the Job (2009) Downloads
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