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Learning and job search dynamics during the Great Recession

Tristan Potter

Journal of Monetary Economics, 2021, vol. 117, issue C, 706-722

Abstract: Krueger and Mueller (2011) document that search effort declined with unemployment duration during the Great Recession. I show that variation in past effort explains this decline. Furthermore, job offers increase subsequent effort. These facts are inconsistent with standard models of search. I introduce a model of sequential search in which workers are uncertain about the offer arrival process and learn through search. Evolving beliefs influence search through two competing channels: the opportunity cost of leisure and the option value of unemployment. Estimation of the model indicates that learning provides a strong account of job search dynamics during the Great Recession.

Keywords: Unemployment; Sequential search; Learning (search for similar items in EconPapers)
JEL-codes: D83 E24 J64 (search for similar items in EconPapers)
Date: 2021
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Working Paper: Learning and Job Search Dynamics during the Great Recession (2017) Downloads
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DOI: 10.1016/j.jmoneco.2020.04.006

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