TY  - JOUR
AU  - Menzio,Guido
AU  - Shi,Shouyong
TI  - Block Recursive Equilibria for Stochastic Models of Search on the Job
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 14907
PY  - 2009
Y2  - April 2009
UR  - http://www.nber.org/papers/w14907
L1  - http://www.nber.org/papers/w14907.pdf
N1  - Author contact info:
Guido Menzio
Department of Economics
University of Pennsylvania
467 McNeil Building
3718 Locust Walk
Philadelphia, PA 19104
Tel: 773/865-6337
Fax: 215/573-2057
E-Mail: gmenzio@econ.upenn.edu

Shouyong Shi
University of Toronto
Department of Economics
150 St. George Street
Toronto, Ontario
Canada, M5S 3G7
Tel: 416-978-4978
Fax: 416-978-6713
E-Mail: shouyong@chass.utoronto.ca
AB  - In this paper, we develop a general stochastic model of directed search on the job. Like in the analogous models of random search on the job, the state of the economy in our model includes the infinite-dimensional distribution of workers across different employment states (unemployment, and employment at different wages). Unlike the analogous models of random search on the job, our model admits an equilibrium in which the agents' value and policy functions do not depend on the distribution of workers. We refer to this type of equilibrium as a Block Recursive Equilibrium. Therefore, while solving the equilibrium of a random search model in a stochastic environment is a difficult task both analytically and computationally, solving the Block Recursive Equilibrium of our model is as easy as solving a representative agent model.
ER  -