TY - JOUR
T1 - Labor market search and capital accumulation
T2 - Some analytical results
AU - Shi, Shouyong
AU - Wen, Quan
N1 - Funding Information:
We thank a referee and an associate editor for comments on an earlier version of this paper that have led to significant improvements. We are also grateful to the Social Sciences and Humanities Research Council of Canada for financial support. All remaining errors are ours alone.
PY - 1997/8
Y1 - 1997/8
N2 - This paper integrates labor market search into an intertemporal utility maximization framework and analytically solves for equilibrium dynamics. The integrated model improves upon a neoclassical model by generating the realistic hump-shaped response of output to a productivity shock and the counterclockwise dynamics of job vacancies and unemployment around the Beveridge curve. In contrast to a standard search model, our model endogenizes agents' reservation wage as the marginal rate of substitution between leisure and consumption, through which agents' intertemporal consumption decision directly affects the labor market behavior. As a result, even a permanent productivity shock generates non-monotonic dynamics in employment.
AB - This paper integrates labor market search into an intertemporal utility maximization framework and analytically solves for equilibrium dynamics. The integrated model improves upon a neoclassical model by generating the realistic hump-shaped response of output to a productivity shock and the counterclockwise dynamics of job vacancies and unemployment around the Beveridge curve. In contrast to a standard search model, our model endogenizes agents' reservation wage as the marginal rate of substitution between leisure and consumption, through which agents' intertemporal consumption decision directly affects the labor market behavior. As a result, even a permanent productivity shock generates non-monotonic dynamics in employment.
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U2 - 10.1016/S0165-1889(97)00022-5
DO - 10.1016/S0165-1889(97)00022-5
M3 - Article
AN - SCOPUS:0031206152
VL - 21
SP - 1747
EP - 1776
JO - Journal of Economic Dynamics and Control
JF - Journal of Economic Dynamics and Control
SN - 0165-1889
IS - 10
ER -