Job Ladder and Wealth Dynamics in General Equilibrium

Title: Job Ladder and Wealth Dynamics in General Equilibrium

Abstract: This paper develops a macroeconomic model that combines an incomplete-markets overlapping-generations economy with a job ladder featuring strategic wage bargaining and endogenous search effort of employed and non-employed workers. The model is able to capture the empirical relationships between search activity, labor market transition, earnings and wealth that we document in German data. We use the calibrated model to examine the mechanisms by which age and wealth matter for worker flows. We further analyze the impact of unemployment insurance and progressive taxation for labor market dynamics, wage and wealth inequality, and macroeconomic outcomes.