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The Reservation Wage under CARA and Limited Borrowing

Christian Bauer ()

Discussion Papers in Economics from University of Munich, Department of Economics

Abstract: A continuous-time sequential job search model with savings and CARA preferences is solved analytically without resorting to unlimited borrowing and real-valued consumption. I isolate the effects of limited borrowing and nonnegative consumption as well as risk-aversion on the reservation wage by using a system of ordinary differential equations.

Keywords: labor income risk; wealth-dependent reservation wage; borrowing limit (search for similar items in EconPapers)
JEL-codes: C61 D91 E21 J64 (search for similar items in EconPapers)
Date: 2009-03-15
New Economics Papers: this item is included in nep-dge and nep-lab
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Journal Article: On the reservation wage under CARA and limited borrowing (2011) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:lmu:muenec:10291

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