Search theory routinely assumes that decisions about the acceptance/rejection of job offers (and, hence, about labor market movements between jobs or across employment states) are made by individuals acting in isolation. In reality, the vast majority of workers are somewhat tied to their partners-in couples and families-and decisions are made jointly. This paper studies, from a theoretical viewpoint, the joint job-search and location problem of a household formed by a couple (e.g., husband and wife) who perfectly pools income. The objective of the exercise, very much in the spirit of standard search theory, is to characterize the reservation wage behavior of the couple and compare it to the single-agent search model in order to understand the ramifications of partnerships for individual labor market outcomes and wage dynamics. We focus on two main cases. First, when couples are risk averse and pool income, joint search yields new opportunities-similar to on-the-job search-relative to the single-agent search. Second, when the two spouses in a couple face job offers from multiple locations and a cost of living apart, joint-search features new frictions and can lead to significantly worse outcomes than single-agent search.
Search theory routinely assumes that decisions about the acceptance/rejection of job offers (and, hence, about labor market movements between jobs or across employment states) are made by individuals acting in isolation. In reality, the vast majority of workers are somewhat tied to their partners-in couples and families-and decisions are made jointly. This paper studies, from a theoretical viewpoint, the joint job-search and location problem of a household formed by a couple (e.g., husband and wife) who perfectly pools income. The objective of the exercise, very much in the spirit of standard search theory, is to characterize the reservation wage behavior of the couple and compare it to the single-agent search model in order to understand the ramifications of partnerships for individual labor market outcomes and wage dynamics. We focus on two main cases. First, when couples are risk averse and pool income, joint search yields new opportunities-similar to on-the-job search-relative to the single-agent search. Second, when the two spouses in a couple face job offers from multiple locations and a cost of living apart, joint search features new frictions and can lead to significantly worse outcomes than single-agent search.
In this paper, I study the effects of innovations in information technology on the housing market. Specifically, I focus on the improved ability of lenders to assess the credit risk of home buyers, which has become possible with the emergence of automated underwriting systems in the United States in the mid-1990s. I develop a standard life-cycle model with incomplete markets and idiosyncratic income uncertainty. I explicitly model the housing tenure choice of the households: rent/purchase decision for renters and stay/sell/default decision for homeowners. Risk-free lenders offer mortgage contracts to prospective home buyers and the terms of these contracts depend on the observable characteristics of households. Households are born as either good credit risk types-having a high time discount factor-or bad types-having a low time discount factor. The type of the household is the only source of asymmetric information between households and lenders. I find that as lenders have better information about the type of households, the average downpayment fraction decreases together with an increase in the average mortgage premium, the foreclosure rate, and the dispersions of mortgage interest rates and downpayment fractions, which are consistent with the trends in the housing market in the last 15 years. From a welfare perspective, I find that better information, on average, makes households better off.
This paper studies the joint transitional dynamics of the foreclosures and house prices in a standard life‐cycle incomplete markets model with housing and a realistic long‐term mortgage structure. We calibrate our model to match several long‐term features of the U.S. housing market, and analyze the effects of several unexpected and permanent shocks on the house price and the foreclosure rate both across the steady states and along the transition between the steady states. We examine permanent, unexpected shocks to the risk‐free interest rate, the minimum down‐payment ratio, and unemployment. During the transition, these shocks create large movements in house prices. More importantly, the foreclosure dynamics are quite significant along the transition compared to the steady‐state changes, and there are strong feedbacks between foreclosures and house prices. We assess the effects of a temporary reduction in the risk‐free interest rate, which has moderate effects on house prices but little effect on foreclosure dynamics. We also study the effects of an ex ante macroprudential policy, which establishes a minimum down‐payment requirement at a higher threshold. Such a macroprudential policy helps substantially stabilize both house prices and foreclosures.
Search theory routinely assumes that decisions about the acceptance/rejection of job offers (and, hence, about labor market movements between jobs or across employment states) are made by individuals acting in isolation. In reality, the vast majority of workers are somewhat tied to their partners-in couples and families-and decisions are made jointly. This paper studies, from a theoretical viewpoint, the joint job-search and location problem of a household formed by a couple (e.g., husband and wife) who perfectly pools income. The objective of the exercise, very much in the spirit of standard search theory, is to characterize the reservation wage behavior of the couple and compare it to the single-agent search model in order to understand the ramifications of partnerships for individual labor market outcomes and wage dynamics. We focus on two main cases. First, when couples are risk averse and pool income, joint search yields new opportunities-similar to on-the-job search-relative to the single-agent search. Second, when the two spouses in a couple face job offers from multiple locations and a cost of living apart, joint-search features new frictions and can lead to significantly worse outcomes than single-agent search.
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