Joint-Search Theory: New Opportunities and New Frictions

52 Pages Posted: 1 Jun 2009 Last revised: 9 Jul 2010

See all articles by Bulent Guler

Bulent Guler

Indiana University Bloomington - Department of Economics

Fatih Guvenen

University of Minnesota - Department of Economics; National Bureau of Economic Research (NBER)

Giovanni L. Violante

New York University, Department of Economics; Centre for Economic Policy Research (CEPR)

Date Written: May 2009

Abstract

Search theory routinely assumes that decisions about the acceptance/rejection of job offers (and, hence, about labor market movements between jobs or across employment states) are made by individuals acting in isolation. In reality, the vast majority of workers are somewhat tied to their partners--in couples and families--and decisions are made jointly. This paper studies, from a theoretical viewpoint, the joint job-search and location problem of a household formed by a couple (e.g., husband and wife) who perfectly pools income. The objective of the exercise, very much in the spirit of standard search theory, is to characterize the reservation wage behavior of the couple and compare it to the single-agent search model in order to understand the ramifications of partnerships for individual labor market outcomes and wage dynamics. We focus on two main cases. First, when couples are risk averse and pool income, joint search yields new opportunities--similar to on-the-job search--relative to the single-agent search. Second, when the two spouses in a couple face job offers from multiple locations and a cost of living apart, joint-search features new frictions and can lead to significantly worse outcomes than single-agent search.

Suggested Citation

Guler, Bulent and Guvenen, Fatih and Violante, Giovanni L., Joint-Search Theory: New Opportunities and New Frictions (May 2009). NBER Working Paper No. w15011. Available at SSRN: https://ssrn.com/abstract=1412043

Bulent Guler

Indiana University Bloomington - Department of Economics ( email )

Wylie Hall
Bloomington, IN 47405-6620
United States
812-855-7791 (Phone)

HOME PAGE: http://mypage.iu.edu/~bguler/

Fatih Guvenen (Contact Author)

University of Minnesota - Department of Economics ( email )

Minneapolis, MN 55455
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Giovanni L. Violante

New York University, Department of Economics ( email )

269 Mercer Street
New York, NY 10003
United States
212-992-9771 (Phone)
212-995-4186 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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