Efficient Learning and Job Turnover in the Labor Market
34 Pages Posted: 3 Dec 2011 Last revised: 30 Mar 2016
Date Written: March 29, 2016
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: Suggested Citation