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Job Search and Hyperbolic Discounting: Structural Estimation and Policy Evaluation

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M.Daniele Paserman

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Abstract

This article estimates the degree of hyperbolic discounting in a job search model quantitatively, using data on unemployment spells and accepted wages from the NLSY. The results point to a substantial degree of hyperbolic discounting for low and medium wage workers. The structural estimates are then used to evaluate alternative policy interventions aimed at reducing unemployment. The estimated effects of a given policy can vary by up to 40%, depending on the assumed type of time discounting. Some interventions may raise the long-run utility of hyperbolic workers, and at the same time reduce unemployment duration and lower government expenditures. Copyright © The Author(s). Journal compilation © Royal Economic Society 2008.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-0297.2008.02175.x
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Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 118 (2008)
Issue (Month): 531 (08)
Pages: 1418-1452
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Handle: RePEc:ecj:econjl:v:118:y:2008:i:531:p:1418-1452

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    Other versions:
  4. Thaler, Richard, 1981. "Some empirical evidence on dynamic inconsistency," Economics Letters, Elsevier, vol. 8(3), pages 201-207. [Downloadable!] (restricted)
  5. repec:rus:hseeco:93730 is not listed on IDEAS
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    Other versions:
  13. Orley Ashenfelter & David Ashmore & Olivier Deschenes, 1999. "Do Unemployment Insurance Recipients Actively Seek Work? Randomized Trials in Four U.S. States," NBER Working Papers 6982, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  14. Ted O' Donoghue & Matthew Rabin, 2001. "Choice and Procrastination," Microeconomics 0012002, EconWPA. [Downloadable!]
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    • David Laibson & Andrea Repetto & Jeremy Tobacman, 2000. "A Debt Puzzle," NBER Working Papers 7879, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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    Other versions:
  18. Ted O'Donoghue & Matthew Rabin, 1999. "Doing It Now or Later," American Economic Review, American Economic Association, vol. 89(1), pages 103-124, March. [Downloadable!] (restricted)
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. David Laibson & Andrea Repetto & Jeremy Tobacman, 2007. "Estimating Discount Functions with Consumption Choices over the Lifecycle," NBER Working Papers 13314, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Malmendier, Ulrike M. & Della Vigna, Stefano, 2003. "Overestimating Self-Control: Evidence from the Health Club Industry," Research Papers 1800, Stanford University, Graduate School of Business. [Downloadable!]
  3. Hanming Fang & Dan Silverman, 2004. "Time-inconsistency and Welfare Program Participation: Evidence from the NLSY," Cowles Foundation Discussion Papers 1465, Cowles Foundation, Yale University. [Downloadable!]
    Other versions:
  4. Michael P. Keane & Kenneth I. Wolpin, 2009. "Empirical Applications of Discrete Choice Dynamic Programming Models," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(1), pages 1-22, January. [Downloadable!] (restricted)
  5. Kahn, Lawrence M., 2009. "Temporary Jobs and Job Search Effort in Europe," IZA Discussion Papers 4020, Institute for the Study of Labor (IZA). [Downloadable!]
  6. Ted O’Donoghue & Matthew Rabin, 2006. "Incentives and Self Control," Levine's Bibliography 122247000000001262, UCLA Department of Economics. [Downloadable!]
  7. Kevin X. D. Huang & Zheng Liu & Qi Zhu, 2006. "Temptation and self-control: some evidence and applications," Staff Report 367, Federal Reserve Bank of Minneapolis. [Downloadable!]
    Other versions:
  8. John Ameriks & Andrew Caplin & John Leahy & Tom Tyler, 2004. "Measuring Self-Control," NBER Working Papers 10514, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Francesco Drago, 2006. "Career Consequences of Hyperbolic Time Preferences," IZA Discussion Papers 2113, Institute for the Study of Labor (IZA). [Downloadable!]
  10. Stefano DellaVigna & M. Daniele Paserman, 2004. "Job Search and Impatience," NBER Working Papers 10837, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  11. Malmendier, Ulrike M. & Della Vigna, Stefano, 2003. "Contract Design and Self Control: Theory and Evidence," Research Papers 1801, Stanford University, Graduate School of Business. [Downloadable!]
  12. Stefano DellaVigna & Ulrike Malmendier, 2004. "Overestimating Self_Control: Evidence from the Health Club Industry," NBER Working Papers 10819, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  13. Kevin X.D. Huang & Zheng Liu & Qi Zhu, 2005. "Temptation and Self-Control: Some Evidence from the Consumer Expenditure Survey," Emory Economics 0507, Department of Economics, Emory University (Atlanta). [Downloadable!]
    Other versions:
  14. Krueger, Alan B. & Mueller, Andreas, 2008. "Job Search and Unemployment Insurance: New Evidence from Time Use Data," IZA Discussion Papers 3667, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  15. Stefano DellaVigna & Ulrike Malmendier, 2006. "Paying Not to Go to the Gym," American Economic Review, American Economic Association, vol. 96(3), pages 694-719, June. [Downloadable!]
  16. Malmendier, Ulrike M. & Della Vigna, Stefano, 2002. "Overestimating Self-Control: Evidence from the Health Club Industry," Research Papers 1880, Stanford University, Graduate School of Business. [Downloadable!]
  17. Raj Chetty, 2004. "Consumption Commitments, Unemployment Durations, and Local Risk Aversion," NBER Working Papers 10211, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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