Efficient Learning and Job Turnover in the Labor Market

34 Pages Posted: 3 Dec 2011 Last revised: 30 Mar 2016

Fei Li

University of North Carolina (UNC) at Chapel Hill

Xi Weng

Peking University

Date Written: March 29, 2016

Abstract

This paper nests a continuous-time learning model Jovanovic (1984) into a directed on-the-job search framework. We prove that the socially efficient allocation is separable, i.e., the workers' value functions and optimal controls are independent of both the distribution of workers across their current match qualities and the unemployment rate. We characterize the dynamics of job transitions in the efficient allocation. Furthermore, when the matching technology is linear, our numerical results show that increasing the vacancy creation cost and the speed of learning have ambiguous effects on the unemployment rate and aggregate job transition.

Keywords: Learning, Directed On-the-Job Search, Brownian Motion, Separability

JEL Classification: D83, J31

Suggested Citation

Li, Fei and Weng, Xi, Efficient Learning and Job Turnover in the Labor Market (March 29, 2016). PIER Working Paper No. 11-040. Available at SSRN: https://ssrn.com/abstract=1967503 or http://dx.doi.org/10.2139/ssrn.1967503

Fei Li (Contact Author)

University of North Carolina (UNC) at Chapel Hill ( email )

102 Ridge Road
Chapel Hill, NC NC 27514
United States

Xi Weng

Peking University ( email )

Beijing, 100871
China

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