Job Search and Participation

Abstract

The main purpose of this paper is to consider the question of labour force participation within a generalized model of job search. The only important restrictions placed oni the search model are that search takes place sequentially and that the individual be able to search only a finite number of times in his lifetime. Other less important restrictions are placed to simplify the exposition. The most important of these is, perhaps, that the individual holds his beliefs about the sequence of the distributions of job offers with complete certainty. This implies that search is used as a job-finding activity and not as an information-gathering one. Although some workers may use search for informationgathering purposes, we would expect the job-finding process to satisfy the same qualitative properties whether the information-gathering function is taken into account or not (Rothschild, 1974; Kohn and Shavell, 1974). The optimal policy is obtained in the next section for a general utility function and any sequence of distributions of job offers. Section II derives the dynamic properties of the model and utilizes the general framework to analyse the questions of optimal responses to a changing environment and participation and job search over the cycle. Section III concludes the paper with a brief summary.