Abstract
We use a heterogeneous agent New Keynesian model with a frictional labor market featuring on-the-job-search to study how job switching affects consumption decisions for individuals with different wealth levels. We find that an increased job switching rate, driven by an exogenous shift in employed individuals' job search efficiency—acting as a positive future income shock—results in a larger decline in current demand for the wealth rich relative to the wealth poor. This larger consumption reduction for the wealth rich is due to the equilibrium decline in their financial wealth.
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