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IT'S ABOUT TIME: IMPLICATIONS OF THE PERIOD LENGTH IN AN EQUILIBRIUM SEARCH MODEL
Author(s) -
Wolthoff Ronald
Publication year - 2014
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/iere.12073
Subject(s) - simultaneity , economics , unemployment , period (music) , duration (music) , econometrics , infinitesimal , distribution (mathematics) , demographic economics , mathematics , macroeconomics , physics , mathematical analysis , classical mechanics , acoustics
Empirical evidence suggests that transitions between employment states are highly clustered around the first day of each workweek or month. I analyze the effect of this phenomenon by presenting an equilibrium search model in which the period length is a parameter determining the degree of clustering. Infinitesimally short periods result in a continuous‐time model with bilateral meetings, whereas longer time periods introduce the possibility of recall or simultaneity of job offers. In this environment, I show that the period length has a profound effect on equilibrium outcomes, including the unemployment rate, unemployment duration, and the cross‐sectional wage distribution.