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A search-theoretic explanation for the negative correlation between labor income and impatience

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  • Cysne, Rubens Penha

Abstract

Lawrance (1991) has shown, through the estimation of consumption Euler equations, that subjective rates of impatience (time preference) in the U.S. are three to Öve percentage points higher for households with lower average labor incomes than for those with higher labor income. From a theoretical perspective, the sign of this correlation in a job-search model seems at Örst to be undetermined, since more impatient workers tend to accept wage o§ers that less impatient workers would not, thereby remaining less time unemployed. The main result of this paper is showing that, regardless of the existence of e§ects of opposite sign, and independently of the particular speciÖcations of the givens of the model, less impatient workers always end up, in the long run, with a higher average income. The result is based on the (unique) invariant Markov distribution of wages associated with the dynamic optimization problem solved by the consumers. An example is provided to illustrate the method.

Suggested Citation

  • Cysne, Rubens Penha, 2004. "A search-theoretic explanation for the negative correlation between labor income and impatience," FGV/EPGE Economics Working Papers (Ensaios Economicos da EPGE) 558, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  • Handle: RePEc:fgv:epgewp:558
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    References listed on IDEAS

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    1. J. J. McCall, 1970. "Economics of Information and Job Search," The Quarterly Journal of Economics, Oxford University Press, vol. 84(1), pages 113-126.
    2. Lawrance, Emily C, 1991. "Poverty and the Rate of Time Preference: Evidence from Panel Data," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 54-77, February.
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    Cited by:

    1. Cysne, Rubens Penha, 2004. "Income inequality: the role of impatience in a job-search process," FGV/EPGE Economics Working Papers (Ensaios Economicos da EPGE) 559, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
    2. Athayde, Gustavo M. de & Flôres Junior, Renato Galvão, 2004. "Do higher moments really matter in portfolio choice?," FGV/EPGE Economics Working Papers (Ensaios Economicos da EPGE) 574, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
    3. Cysne, Rubens Penha, 2006. "On The Positive Correlation Between Income and Patience," Revista Brasileira de Economia - RBE, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil), vol. 60(1), January.
    4. Cysne, Rubens Penha, 2004. "Income inequality in a job-search model with heterogeneous time preferences," FGV/EPGE Economics Working Papers (Ensaios Economicos da EPGE) 538, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
    5. Rubens Penha Cysne, 2006. "Income Inequality in a Job-Search Model With Heterogeneous Discount Factors," Economia, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics], vol. 7(2), pages 217-224.
    6. Cysne, Rubens Penha, 2006. "Income inequality in a job-search model with heterogeneous discount factors: (revised version, forthcoming 2006, Revista Economia)," FGV/EPGE Economics Working Papers (Ensaios Economicos da EPGE) 611, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
    7. Moreira, Humberto Ataíde & Araújo, Aloísio Pessoa de & Castro Filho, Luciano I. de, 2004. "Pure strategy equilibria of multidimensional and non-monotonic auctions," FGV/EPGE Economics Working Papers (Ensaios Economicos da EPGE) 571, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
    8. Fernando Barbosa & Alexandre Cunha & Elvia Sallum, 2006. "Competitive equilibrium hyperinflation under rational expectations," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 29(1), pages 181-195, September.
    9. Horowitz, Andrew W. & Flôres Junior, Renato Galvão, 2004. "Beyond indifferent players: on the existence of prisoners dilemmas in games with amicable and adversarial preferences," FGV/EPGE Economics Working Papers (Ensaios Economicos da EPGE) 576, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).

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