The Reservation Wage under CARA and Limited Borrowing

A continuous-time sequential job search model with savings and CARA preferences is solved analytically without resorting to unlimited borrowing and real-valued consumption. I isolate the effects of limited borrowing and nonnegative consumption as well as risk-aversion on the reservation wage by using a system of ordinary differential equations.

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Year of publication:	2009-03-15
Authors:	Bauer, Christian
Institutions:	Volkswirtschaftliche Fakultät, Ludwig-Maximilians-Universität München
Subject:	labor income risk \| wealth-dependent reservation wage \| borrowing limit

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Extent:	application/pdf
Series:	Discussion Papers in Economics.
Type of publication:	Book / Working Paper
Language:	English
Classification:	C61 - Optimization Techniques; Programming Models; Dynamic Analysis ; E21 - Consumption; Saving ; D91 - Intertemporal Consumer Choice; Life Cycle Models and Saving ; J64 - Unemployment: Models, Duration, Incidence, and Job Search
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10004965371