Asset Accumulation and Short Term Employment

If access to credit is limited (especially when young or unemployed) but ”bad” jobs are easy to come by, then job seekers might use short term employment in undesirable jobs as a way to finance consumption during subsequent unemployed search for a “good” job. In this paper we explore this idea in two ways. First, we document empirical patterns of short term employment and asset accumulation among job seekers. Second, we build a theoretical model of job search by risk averse, credit constrained agents. In this model we are able to demonstrate analytically that voluntary planned quits can occur as agents cycle between accumulating assets in short term employment and unemployed search for more desirable employment.