Job Search with Strategic Recall

This chapter assesses wage setting in the presence of search and matching frictions when workers and firms can hold onto and recall information they acquire about employment opportunities. Recalling these previous employment opportunities alters the number of firms involved in wage bidding and enables workers to increase their share of output. Recall can also provide insurance in the event of a job destruction which then generates a rich pattern of job-to-job transitions as observed in the data. The impact of recalling job search histories also depends on the nature of matching frictions. Stock-flow matching slows down the rate at which workers encounter employment opportunities as unemployment duration. progresses whereas random search assumes a constant matching rate over time. Accounting for this evolution of matching rates delivers important wage dynamics. Similarly, limiting matching to just two periods can propagate aggregate market fluctuations.