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Household Search or Individual Search: Does It Matter? Evidence from Lifetime Inequality Estimates

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Abstract

We develop and estimate an household search model to evaluate if ignoring that labor market decisions are taken at the household level - as usually done in search models of the labor market - has relevant empirical consequences. We evaluate the impact of this potential mispecification error by comparing parameters estimates under different specifications, by running a specification test, and by generating simulations to compute cross-sectional and lifetime inequality measures. We build on previous literature (Dey and Flinn (2008) and Guler, Guvenen and Violante (2011)) to propose a novel identification strategy of the risk aversion parameters. We find that ignoring the household as the actual unit of decision-making leads to estimate gender differentials in average wage offers two and a half times larger and to erroneously conclude that women experience higher inequality in wages and earnings than men.

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  • Luca Flabbi and James Mabli, 2012. "Household Search or Individual Search: Does It Matter? Evidence from Lifetime Inequality Estimates," Working Papers gueconwpa~12-12-03, Georgetown University, Department of Economics.
    • Handle: RePEc:geo:guwopa:gueconwpa~12-12-03
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    Cited by:

    1. Christine Braun & Charlie Nusbaum & Peter Rupert, 2017. "Dual Job Search and Migration," 2017 Meeting Papers 789, Society for Economic Dynamics.
    2. Zaharieva, Anna, 2013. "Social welfare and wage inequality in search equilibrium with personal contacts," Labour Economics, Elsevier, vol. 23(C), pages 107-121.
    3. Valladares-Esteban, Arnau & Choi, Sekyu, 2016. "On households and unemployment insurance," Discussion Paper Series In Economics And Econometrics 1508, Economics Division, School of Social Sciences, University of Southampton.
    4. Guler, Bulent & Guvenen, Fatih & Violante, Giovanni L., 2012. "Joint-search theory: New opportunities and new frictions," Journal of Monetary Economics, Elsevier, vol. 59(4), pages 352-369.
    5. Zaharieva, Anna, 2015. "Social contacts and referrals in a labor market with on-the-job search," Labour Economics, Elsevier, vol. 32(C), pages 27-43.
    6. Mauring, Eeva, 2016. "A two-agent model of sequential search and choice," Journal of Economic Behavior & Organization, Elsevier, vol. 123(C), pages 122-137.

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    More about this item

    Keywords

    Household Search; Inequality; Structural Estimation;
    All these keywords.

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques

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