Block Recursive Equilibria for Stochastic Models of Search on the Job / Guido Menzio, Shouyong Shi.

Format:

Book

Author/Creator:

Menzio, Guido.

Contributor:

National Bureau of Economic Research.

Shi, Shouyong.

Series:

Working Paper Series (National Bureau of Economic Research) no. w14907.

NBER working paper series no. w14907

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2009.

Summary:

In this paper, we develop a general stochastic model of directed search on the job. Like in the analogous models of random search on the job, the state of the economy in our model includes the infinite-dimensional distribution of workers across different employment states (unemployment, and employment at different wages). Unlike the analogous models of random search on the job, our model admits an equilibrium in which the agents' value and policy functions do not depend on the distribution of workers. We refer to this type of equilibrium as a Block Recursive Equilibrium. Therefore, while solving the equilibrium of a random search model in a stochastic environment is a difficult task both analytically and computationally, solving the Block Recursive Equilibrium of our model is as easy as solving a representative agent model.

Notes:

Print version record

April 2009.