Labour market frictions, endogenous retirement, and wealth (with Melvyn Coles)
Abstract: Life-cycle theory has long recognised that the properties of earnings processes affect saving decisions. Individual earning profiles are labour-market outcomes and the main life-cycle stages - a sequence of employment and retirement - correspond to labour-market decisions. This paper demonstrates how such sequence emerges as a result of optimal labour-market behaviour of risk-averse workers facing search frictions; provides a tractable description of wealth dynamics emphasising the link between workers' labour-market productivity, wealth, retirement plans and saving decisions; explores the implications of efficient retirement choice for the saving decisions of heterogeneous households and studies their relevance in accounting for the empirical wealth distribution; and demonstrates the effect of costly education on the wealth distribution among individuals with different earning ability.
On-the-job search, human capital accumulation and endogenous firm productivity
Abstract : This paper studies the implications of human capital accumulation for firms’ decisions to invest in match-specific productivity. This brings a novel insight into the relationship between human capital accumulation and the equilibrium wage distribution. The paper extends a wage- posting model of on-the-job search with learning-by-doing (Burdett et al., 2011) by introducing an investment choice in the firms’ problem. Since high-paying firms see their workers quit less often and attract more experienced workforce in equilibrium, they invest more in productive capacity; as they are more productive, they pay higher wages. This links the rate of human capital accumulation to the equilibrium distribution of firm productivities and wages. The model is solved numerically and it is shown that high rates of accumulation imply more disperse and positively skewed offer distributions, and have a quantitatively large effect.
Wealth and Labor Market Outcomes: Evidence from the SIPP 1996-2000
Abstract: This paper studies the empirical relationship between wealth and two labour market outcomes - re-employment wages and unemployment durations. The analysis complements a closely related literature by exploiting new data from the Survey of Income and Program Participation. As in prior studies, negative relationship between net worth and hazard rates to employment is documented. In disagreement with prior studies, the relationship between re- employment wages and net worth is found to be non-monotonic - re-employment wages decrease with net worth while the latter is negative and then increases when positive. It is argued that prior findings likely result from misspecification and the results cast doubt on causal interpretations of the relationship typically made in the literature.
Abstract: Life-cycle theory has long recognised that the properties of earnings processes affect saving decisions. Individual earning profiles are labour-market outcomes and the main life-cycle stages - a sequence of employment and retirement - correspond to labour-market decisions. This paper demonstrates how such sequence emerges as a result of optimal labour-market behaviour of risk-averse workers facing search frictions; provides a tractable description of wealth dynamics emphasising the link between workers' labour-market productivity, wealth, retirement plans and saving decisions; explores the implications of efficient retirement choice for the saving decisions of heterogeneous households and studies their relevance in accounting for the empirical wealth distribution; and demonstrates the effect of costly education on the wealth distribution among individuals with different earning ability.
On-the-job search, human capital accumulation and endogenous firm productivity
Abstract : This paper studies the implications of human capital accumulation for firms’ decisions to invest in match-specific productivity. This brings a novel insight into the relationship between human capital accumulation and the equilibrium wage distribution. The paper extends a wage- posting model of on-the-job search with learning-by-doing (Burdett et al., 2011) by introducing an investment choice in the firms’ problem. Since high-paying firms see their workers quit less often and attract more experienced workforce in equilibrium, they invest more in productive capacity; as they are more productive, they pay higher wages. This links the rate of human capital accumulation to the equilibrium distribution of firm productivities and wages. The model is solved numerically and it is shown that high rates of accumulation imply more disperse and positively skewed offer distributions, and have a quantitatively large effect.
Wealth and Labor Market Outcomes: Evidence from the SIPP 1996-2000
Abstract: This paper studies the empirical relationship between wealth and two labour market outcomes - re-employment wages and unemployment durations. The analysis complements a closely related literature by exploiting new data from the Survey of Income and Program Participation. As in prior studies, negative relationship between net worth and hazard rates to employment is documented. In disagreement with prior studies, the relationship between re- employment wages and net worth is found to be non-monotonic - re-employment wages decrease with net worth while the latter is negative and then increases when positive. It is argued that prior findings likely result from misspecification and the results cast doubt on causal interpretations of the relationship typically made in the literature.