Search, layoffs and reservation wages when job offers follow a stochastic process

Despite the fact that the empirical data indicate the presence of non- stationarity in wage offer distributions, the majority of job-search models are stationary. We model logs of wage offers as a Markov process with i.i.d. increments and solve two typical job-search models for reservation wages, value functions and expected individual duration of unemployment. All solutions are in the closed form and admit interpretation in terms of expected present values of certain streams of payoffs.