Management Science and Financial Engineering

The Korean Operations Research and Management Science Society (한국경영과학회)
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When Do the Unemployed Jump in the Workforce?

  • Lee, Hyun-Tak (Department of Industrial and Management Eng., POSTECH) ;
  • Jang, Bong-Gyu (Department of Industrial and Management Eng., POSTECH) ;
  • Park, Seyoung (Department of Industrial and Management Eng., POSTECH)
  • Received : 2013.10.24
  • Accepted : 2013.11.08
  • Published : 2013.11.22
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Abstract

This paper studies an optimal consumption and portfolio choice problem for unemployed people who have an option to work. Our problem is to find optimal consumption, risky investment, and workforce re-entry strategies for the unemployed. We find a closed form of the critical wealth level to re-enter the workforce. We show that the unemployed with a higher disutility of labor or a larger relative risk aversion are more reluctant to re-enter the workforce.

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References

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