Search unemployment with on-the-job search

Abstract

This paper introduces on-the-job search into the model of search equilibrium that builds on the concept of the matching function and non-cooperative wage behaviour. On-the-job search takes place only at short job tenures because of the accumulation of job-specific human capital. The model of search equilibrium retains its familiar structure but yields new results. The most interesting one is a fall in the responsiveness of unemployment to productivity shocks because of induced changes in the composition of jobs and the number of employed job seekers. © 1994 The Review of Economic Studies Limited.