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Working paper 476

Ronald Wolthoff, "It's About Time: Implications of the Period Length in an Equilibrium Search Model", 2013-02-04
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Abstract: Empirical evidence suggests that transitions between employment states are highly clustered around the first day of each workweek or each month. Motivated by this observation, I present an equilibrium search model in which the period length is a parameter that determines the degree of clustering. If the period length goes to zero, convergence to a continuous-time model without clustering is obtained. Longer time periods, however, introduce the possibility of recall (or simultaneity) of job offers. In this environment, I show that the period length has a profound effect on the equilibrium outcomes, including the unemployment rate, average unemployment duration, the labor share, the amount of wage dispersion, as well as the shape of the wage density.

Keywords: labor market flows, search frictions, simultaneous search, on-the-job search, wage dispersion, wage mobility, unemployment

JEL Classification: E24; J31; J64