Wealth accumulation, on-the-job search and inequality

Gaston Chaumont, Shouyong Shi

Research output: Contribution to journalArticlepeer-review

5 Scopus citations

Abstract

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.

Original languageEnglish (US)
Pages (from-to)51-71
Number of pages21
JournalJournal of Monetary Economics
Volume128
DOIs
StatePublished - May 2022

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

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