Joint-Search Theory: New Opportunities and New Frictions

Abstract

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.

Unemployment Duration of Spouses: Evidence From France

“…From all of these examples, we can see that assortative mating does not automatically predict an asymmetric behavior of husbands and wives, but rather a similar response to each other spousal income, either positive or negative. In our view, regardless of the type of assortative mating into marriage, the source of the asymmetry has to be searched in a particular characteristics of a spouse's utility function that leads him (her) to react differently than his spouse (as in the model we propose), or in a gender specificity of the labor market (as in the model of Guler et al ., ).…”

“…Finally, a mostly theoretical work by Guler et al . () analyses a joint search and location problem of a household formed by a couple who pools income. They characterize the reservation wage behavior of the couple and compare it with the single‐agent problem.…”

“…We build on Guler et al . () to explain the asymmetric response in spousal income. We show that, in an environment where both spouses are risk neutral and perfectly pool their income, the presence of a stigma or breadwinner cost bear by the husband may generate a negative correlation between his reservation wage and the labor income of his wife.…”

Equilibrium Search and Tax Credit Reform

“…See Guler et al. () for a theoretical characterization of the reservation wage strategy of couples with income pooling and Dey and Flinn () for a partial equilibrium empirical application.…”

Social Welfare and Wage Inequality in Search Equilibrium with Personal Contacts

“…Finally, this paper relates to the recent literature on family job search (joint search) represented by Guler et al (2009) andEk andHolmlund (2010). This literature shows that joint decisions by spouses give rise to different economic outcomes from the model of single agents.…”