Seminarios

Presenta: Benjamín Villena (Ph.D. in Economics, University of Rochester; Profesor, Universidad Diego Portales)

Título: “Avoiding Layoffs: On-the-job Search and Partial Insurance” (co-autor C. Lizama)

Hora: Martes 5 de mayo, 14:00 hrs.

Abstract: Several pieces of evidence are interpreted as if workers search on-the-job to prevent a layoff, so that it is not unusual they accept wage cuts when moving to new jobs. We conceptualize these behavior as a self-insurance mechanism obtained by exerting effort. We formalize these intuitions by constructing an economy with idiosyncratic dismissal shocks and costly on-the-job search. Workers may use on-the-job search not only as a mechanism to climb the wage ladder, but also to avoid future bad shocks and hence, on-the-job search acts as an insurance mechanism. We show that consumption evolves according to a standard Euler equation in which current effort impacts the future income distribution. We solve and calibrate the model to assess its quantitative empirical performance.

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