Job Search and Asset Accumulation Under Borrowing Constraints

UPF Economics and Business Working Paper No. 649

42 Pages Posted: 19 Jun 2003

See all articles by Sílvio Rendon

Sílvio Rendon

Federal Reserve Banks - Federal Reserve Bank of Philadelphia

Date Written: October 2002

Abstract

In this paper I show how borrowing constraints and job search interact. I fit a dynamic model to data from the National Longitudinal Survey (1979-cohort) and show that borrowing constraints are significant. Agents with more initial assets and more access to credit attain higher wages for several periods after high school graduation. The unemployed maintain their consumption by running down their assets, while the employed save to buffer against future unemployment spells. I also show that, unlike in models with exogenous income streams, unemployment transfers, by allowing agents to attain higher wages do not 'crowd out' but increase saving.

Keywords: Job search, asset accumulation liquidity constraints, consumption, unemployment, estimation of dynamic structural models

JEL Classification: C33, E21, E24, J64

Suggested Citation

Rendon, Silvio, Job Search and Asset Accumulation Under Borrowing Constraints (October 2002). UPF Economics and Business Working Paper No. 649, Available at SSRN: https://ssrn.com/abstract=394421 or http://dx.doi.org/10.2139/ssrn.394421

Silvio Rendon (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Philadelphia ( email )

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Philadelphia, PA 19106-1574
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