Lifetime Labor Supply in a Search Model of Unemployment

Leon J.H. Bettendorf () and Peter Broer
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Leon J.H. Bettendorf: OCFEB, Erasmus University Rotterdam

No 03-032/2, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: This paper investigates the age-dependency of participation andunemployment by integrating job search with intertemporal optimizing behaviorof finitely-lived households. We find that search frictions and tax ratesdistort the decisions of older workers to a much larger extent than that ofyoung workers. This finding provides an explanation of the observed fall ofparticipation rates of elder workers as a result of the post-war increase intax rates and replacement rates. We show that the age pattern of searchunemployment does not match observed unemployment and we propose a new conceptof 'voluntary' unemployment that agrees well with observations.

Keywords: search frictions; labor supply; life cycle; unemployment; retirement. (search for similar items in EconPapers)
JEL-codes: D91 J31 J64 (search for similar items in EconPapers)
Date: 2003-04-09
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Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20030032

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