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Journal of Labor Economics Vol. 31 No. 4 2013

Life-Cycle Equilibrium Unemployment

Arnaud Cheron1,2,3; Jean‐Olivier Hairault4,5,6; François Langot7,2,8,3

1 MaineHealth · 2 Le Mans Université · 3 University of Maine · 4 Centre d'Économie de la Sorbonne · 5 Université Paris 1 Panthéon-Sorbonne · 6 Paris School of Economics · 7 IZA - Institute of Labor Economics · 8 Centre Pour La Recherche Economique et ses Applications

Abstract

This paper extends the job creation–job destruction approach to the labor market to take into account a deterministic finite horizon. As hirings and separations depend on the time over which investment costs can be recouped, the life-cycle setting implies age-differentiated labor-market flows. While search by the unemployed falls with age, the separation rate is rather U-shaped over the life cycle. Worker heterogeneity in the context of undirected search implies an intergenerational externality, which is not eliminated by the Hosios condition. We show that age-specific policies are required to attain the first-best allocation.

DOI
10.1086/669941
Volume
31
Issue
4
Pages
843-882
Language
en
Sources
openalex crossref

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