Job Ladder and Wealth Dynamics in General Equilibrium

• Department of Economics

In this departmental seminar, Leo Kaas (Goethe University Frankfurt) will present the paper: 'Job Ladder and Wealth Dynamics in General Equilibrium.'

This paper develops a macroeconomic model that combines an incomplete-markets overlapping-generations economy with a job ladder featuring sequential wage bargaining, endogenous search effort of employed and non-employed workers, and differences in match quality. With these ingredients our model provides a joint microfoundation for the three main inputs in aggregate production: capital, employment, and labour efficiency. The calibrated model offers a good fit to the empirical age profiles of search activity, job-finding rates, wages and savings. 

We use the model to analyse the impact of tax and transfer policies for labour market dynamics and aggregate economic activity via capital, employment, and labour efficiency channels. Lower unemployment benefits and a less progressive tax schedule bring about welfare losses for a newborn worker which are mainly driven by higher consumption risk and costlier search effort; both policies have differential effects along the age, income and wealth dimensions.

Co-authors: Etienne Lale, Nawid Siassi.