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Job Search and Hyperbolic Discounting: Structural Estimation and Policy Evaluation

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Author Info
Paserman, M. Daniele () (Hebrew University and IZA Bonn)

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Abstract

This paper estimates the structural parameters of a job search model with hyperbolic discounting and endogenous search effort. It estimates quantitatively the degree of hyperbolic discounting, and assesses its implications for the impact of various policy interventions aimed at reducing unemployment. The model is estimated using data on unemployment spells and accepted wages from the National Longitudinal Survey of Youth (NLSY). The likelihood function explicitly incorporates all the restrictions implied by the optimal dynamic programming solution to the model. Both observed and unobserved heterogeneity are accounted for. The results point to a substantial degree of hyperbolic discounting, especially for low and medium wage workers. The structural estimates are also used to evaluate alternative policy interventions for the unemployed. Estimates based on a model with exponential discounting may lead to biased inference on the economic impact of policies.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 997.

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Length: 61 pages
Date of creation: Jan 2004
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Handle: RePEc:iza:izadps:dp997

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Related research
Keywords: job search; hyperbolic discounting; structural estimation; policy evaluation;

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Find related papers by JEL classification:
C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Bayesian Analysis
C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis

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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.:
  1. Lancaster, Tony, 1997. "Exact Structural Inference in Optimal Job-Search Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(2), pages 165-79, April.
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    Other versions:
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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)
    Other versions:
  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)
  17. 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:
  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. John Ameriks & Andrew Caplin & John Leahy & Tom Tyler, 2004. "Measuring Self-Control," NBER Working Papers 10514, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. 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:
  3. 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!]
  4. 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:
  5. Francesco Drago, 2006. "Career Consequences of Hyperbolic Time Preferences," IZA Discussion Papers 2113, Institute for the Study of Labor (IZA). [Downloadable!]
  6. Stefano DellaVigna & M. Daniele Paserman, 2004. "Job Search and Impatience," NBER Working Papers 10837, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  7. 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)
  8. 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!]
  9. Kevin X.D. Huang & Zheng Liu & John Q. Zhu, 2007. "Temptation and Self-Control: Some Evidence and Applications," Working Papers 0711, Department of Economics, Vanderbilt University. [Downloadable!]
    Other versions:
  10. 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)
  11. 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:
  12. Kahn, Lawrence M., 2009. "Temporary Jobs and Job Search Effort in Europe," IZA Discussion Papers 4020, Institute for the Study of Labor (IZA). [Downloadable!]
  13. 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:
  14. Ted O’Donoghue & Matthew Rabin, 2006. "Incentives and Self Control," Levine's Bibliography 122247000000001262, UCLA Department of Economics. [Downloadable!]
  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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