Block Recursive Equilibria for Stochastic Models of Search on the Job

Guido Menzio and Shouyong Shi

PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania

Abstract: In this paper, we develop a general stochastic model of directed search on the job. Like in the analogous models of random search on the job, the state of the economy in our model includes the infinite-dimensional distribution of workers across different employment states (unemployment, and employment at different wages). Unlike the analogous models of random search on the job, our model admits an equilibrium in which the agents’ value and policy functions does not depend on the distribution of workers. We refer to this type of equilibrium as a Block Recursive Equilibrium. Therefore, while solving the equilibrium of a random search model in a stochastic environment is a difficult task both analytically and computationally, solving the Block Recursive Equilibrium of our model is as easy as solving a representative agent model.

Keywords: Directed Search; On the Job Search; Heterogeneity; Aggregate Fluctuations (search for similar items in EconPapers)
JEL-codes: E24 E32 J64 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2009-01-26
New Economics Papers: this item is included in nep-dge, nep-lab and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (40)

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Related works:
Journal Article: Block recursive equilibria for stochastic models of search on the job (2010)
Working Paper: Block Recursive Equilibria for Stochastic Models of Search on the Job (2009)
Working Paper: Block Recursive Equilibria for Stochastic Models of Search on the Job (2009)
Working Paper: Block Recursive Equilibria for Stochastic Models of Search on the Job (2009)
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