Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5098391 | Journal of Economic Dynamics and Control | 2014 | 15 Pages |
Abstract
We construct a multi-sector search and matching model where the unemployed receives idiosyncratic productivity shocks that make working in certain sectors more productive than in the others. Agents must decide which sector to search in and face moving costs when leaving their current sector for another. In this environment, unemployment is associated with an additional risk: low future wages if mobility costs preclude search in the appropriate sector. This introduces a new role for unemployment benefits - productivity insurance while unemployed. For plausible parameterizations unemployment benefits increase per-worker productivity. In addition, the welfare-maximizing benefit level decreases as moving costs increase.
Related Topics
Physical Sciences and Engineering
Mathematics
Control and Optimization
Authors
David L. Fuller, Marianna Kudlyak, Damba Lkhagvasuren,