ECON 702 Midterm: prelim-F16_Menzio
Document Summary
Instructions: there is one question, divided in several subquestions. The number in brackets represents the number of points awarded for answering correctly the each subquestion. If the description of the environment seems incomplete to you, explain why, make the assumptions that you deem necessary to proceed and continue. Good luck: unemployment bene(cid:133)ts and job search. A worker has just became unemployed and is entitled to t periods of unemployment bene(cid:133)ts, with. While unemployed, the worker searches the labor market and receives job o ers with probability (cid:21) 2 (0; 1) per period. If the worker accepts a job o er, he becomes employed and remains employed forever after. If the worker rejects the o er, he keeps on searching. A job o er is a draw ^w from a twice-di erentiable cumulative distribution function f ( ^w) with support [w ; wh], where ^w denotes the wage that the worker will receive if he accepts the job.
