Search, unemployment, and age

We examine a search and matching model of the labor market with overlapping generations of workers. In this model, we focus on the effects of the finite lifetime of workers. As a result of finite lifetime very old workers with the same productivity as younger workers generally earn less. A market solution with Nash-bargained wages is never optimal as old workers search too long compared to the efficient solution. We also examine the effects of policy measures such as hiring subsidies or unemployment insurance on employment. Labor market institutions have a differential impact for different age groups. (C) 2009 Elsevier B.V. All rights reserved.