TY - JOUR
T1 - Wealth accumulation, on-the-job search and inequality
AU - Chaumont, Gaston
AU - Shi, Shouyong
N1 - Publisher Copyright:
© 2022 Elsevier B.V.
PY - 2022/5
Y1 - 2022/5
N2 - We study a directed search equilibrium with risk-averse workers who can search on the job and accumulate non-contingent assets under a borrowing limit. Search outcomes affect earnings and wealth accumulation. In turn, wealth and earnings affect search decisions by changing the optimal trade-off between the wage and the matching probability. The interaction between search and wealth provides important self-insurance. The calibrated model yields significant wage inequality as measured by the mean-min ratio in wages. We analyze the dynamic welfare effects of changes in unemployment insurance and find a relatively limited role for unemployment insurance as self-insurance significantly reduces consumption risk.
AB - We study a directed search equilibrium with risk-averse workers who can search on the job and accumulate non-contingent assets under a borrowing limit. Search outcomes affect earnings and wealth accumulation. In turn, wealth and earnings affect search decisions by changing the optimal trade-off between the wage and the matching probability. The interaction between search and wealth provides important self-insurance. The calibrated model yields significant wage inequality as measured by the mean-min ratio in wages. We analyze the dynamic welfare effects of changes in unemployment insurance and find a relatively limited role for unemployment insurance as self-insurance significantly reduces consumption risk.
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U2 - 10.1016/j.jmoneco.2022.03.009
DO - 10.1016/j.jmoneco.2022.03.009
M3 - Article
AN - SCOPUS:85128144853
SN - 0304-3932
VL - 128
SP - 51
EP - 71
JO - Journal of Monetary Economics
JF - Journal of Monetary Economics
ER -