Labor and Wealth Dynamics in 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 analyze the determinants of job mobility, income and wealth dynamics over the life cycle. We further examine the impact of unemployment insurance and progressive taxation for labor market dynamics, wage inequality and macroeconomic outcomes.