Search capital and Unemployment Duration

Cristina Lafuente

No 427, 2018 Meeting Papers from Society for Economic Dynamics

Abstract: I propose a novel mechanism called search capital to explain long term unemployment patters across different ages: workers who have been successful in finding jobs in the recent past become more efficient at finding jobs in the present. Search ability increases with search experience and depreciates with tenure if workers do not search often enough. This leaves young (who have not gained enough search experience) and older workers in a disadvantaged position, making them more likely to suffer long term unemployment. I focus on the case of Spain, as its dual labour market structure favours the identification of search capital. I provide empirical evidence that search capital affects unemployment duration and wages at the individual level. Then I propose a search model with search capital and calibrate it using Spanish administrative data. The addition of search capital helps the model match the dynamics of unemployment and job finding rates in the data, specially for younger workers.

Date: 2018
New Economics Papers: this item is included in nep-dge and nep-eur
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