Search, Unemployment, and Age
36 Pages Posted: 14 Feb 2006
Date Written: February 2006
We examine a search and matching model of the labor market with overlapping generations of workers. We show that older workers with the same productivity as younger workers generally earn less. A market solution with Nash-bargained wages is never optimal as old workers search too long compared to the efficient solution. We also examine the effects of policy measures such as hiring subsidies or unemployment insurance. We show that the quantitative impact on employment is always higher once one acknowledges the fact that workers can only work for a finite period of time. Labor market institutions have a differential impact for different age groups.
Keywords: search, matching, unemployment
JEL Classification: J41
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