Job Ladder and Wealth Dynamics in General Equilibrium

Abstract

This paper develops a macroeconomic model that combines an incomplete-markets overlapping-generations economy with a job ladder featuring sequential wage bargaining, endogenous search e ort of employed and non-employed workers, and di erences in match quality. The calibrated model o ers a good t to the empirical age pro les of search activity, job- nding rates, wages and savings, so that we use the model to examine the role of age and wealth for worker ows and for the consequences of job loss. We further analyze the impact of unemployment insurance and progressive taxation for labor market dynamics and aggregate economic activity via capital, employment and labor e ciency channels. Lower unemployment bene ts or a less progressive tax schedule bring about welfare losses for a newborn worker household.