published in: International Economic Review, 2014, 55 (3), 839-867
This paper analyzes the role of the period length in a search model of the labor market and argues that it has profound implications for the market equilibrium. In the model, job offers and job destruction shocks arrive according to a Poisson process in continuous time, but institutional factors and/or informational frictions may delay workers' transitions into or out of a job. This effectively creates discrete time periods of arbitrary length, with continuous time being the limit case when the period length goes to zero. Longer periods introduce the possibility of simultaneity or recall of job offers, affecting the labor share, the amount of wage dispersion, as well as the allocation of workers over jobs with different productivity levels. Misspecification of the period length may therefore lead to inconsistent estimates of structural parameters and wrong conclusions on optimal policy.
We use cookies to provide you with an optimal website experience. This includes cookies that are necessary for the operation of the site as well as cookies that are only used for anonymous statistical purposes, for comfort settings or to display personalized content. You can decide for yourself which categories you want to allow. Please note that based on your settings, you may not be able to use all of the site's functions.
Cookie settings
These necessary cookies are required to activate the core functionality of the website. An opt-out from these technologies is not available.
In order to further improve our offer and our website, we collect anonymous data for statistics and analyses. With the help of these cookies we can, for example, determine the number of visitors and the effect of certain pages on our website and optimize our content.