AI Summary & Key Takeaways
AI InsightTheory can also be used to (4) explain the discouraged workerphenomenon/
📌 3 Key Takeaways
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This paper investigates the labor market consequences of incomplete information about workers’ownjob searching process and best occupationsfitting to them. A search and learning model is provided inorder to analyze these effects. In the model, search outcomes relay information about workers’jobfinding abilities and appropriate occupations suited to them, and workers use this information to infertheir types. Our theory explains how search outcomes during unemployment can change the beliefs ofworkers about their jobfinding ability and consequently affect their decisions including the occupationalchoices. Characterization of the model results in a simple value function withreservation level of priorbelief propertythat is similar to reservation wage property. Some interesting facts about both micro andmacro data are identified and our model’s explanation of these facts is discussed. Particularly, ourcharacterization gives rational for why workers with less experience in searching have (1) longer un-employment duration and (2) higher probability of changing occupation by reemployment, and (3) whyshifts in Beveridge curve may be observed. Theory can also be used to (4) explain the discouraged workerphenomenon/