Job Search and Hyperbolic Discounting: Structural Estimation and Policy Evaluation
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.
|Date of creation:||Jan 2004|
|Publication status:||published in: Economic Journal, 2008, 118 (531), 1418–1452|
|Contact details of provider:|| Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany|
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org
|Order Information:|| Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany|
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.:
- O'Donoghue, Ted & Rabin, Matthew, 1997.
"Doing It Now or Later,"
Department of Economics, Working Paper Series
qt7t44m5b0, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Ted O'Donoghue & Matthew Rabin, 1996. "Doing It Now or Later," Discussion Papers 1172, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Ted O'Donoghue and Matthew Rabin ., 1997. "Doing It Now or Later," Economics Working Papers 97-253, University of California at Berkeley.
- Gerard J. van den Berg, 1990.
"Nonstationarity in Job Search Theory,"
Review of Economic Studies,
Oxford University Press, vol. 57(2), pages 255-277.
- Jonathan Gruber & Botond Köszegi, 2001. "Is Addiction "Rational"? Theory and Evidence," The Quarterly Journal of Economics, Oxford University Press, vol. 116(4), pages 1261-1303.
- Stephen A. Woodbury & Robert G. Spiegelman, "undated".
"Bonuses to Workers and Employers to Reduce unemployment: Randomized Trials in Illinois,"
Upjohn Working Papers and Journal Articles
sawrgs1987, W.E. Upjohn Institute for Employment Research.
- Woodbury, Stephen A & Spiegelman, Robert G, 1987. "Bonuses to Workers and Employers to Reduce Unemployment: Randomized Trials in Illinois," American Economic Review, American Economic Association, vol. 77(4), pages 513-530, September.
- David Laibson, 1997.
"Golden Eggs and Hyperbolic Discounting,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 112(2), pages 443-478.
- Thaler, Richard, 1981. "Some empirical evidence on dynamic inconsistency," Economics Letters, Elsevier, vol. 8(3), pages 201-207.
- Holzer, Harry J, 1988.
"Search Method Use by Unemployed Youth,"
Journal of Labor Economics,
University of Chicago Press, vol. 6(1), pages 1-20, January.
- Stephen A. Woodbury, 2009.
in: Labor and Employment Law and Economics, chapter 17
Edward Elgar Publishing.
- Stephen A. Woodbury, 2009. "Unemployment," Book chapters authored by Upjohn Institute researchers, in: Kenneth G. Dau-Schmidt & Seth D. Harris & Orley Lobel (ed.), Labor and Employment Law and Economics, volume 2, pages 480-516 W.E. Upjohn Institute for Employment Research.
- Gerard J. van den Berg & Bas van der Klaauw & Jan C. van Ours, 1998.
"Punitive Sanctions and the Transition Rate from Welfare to Work,"
Tinbergen Institute Discussion Papers
98-076/3, Tinbergen Institute.
- Gerard J. van den Berg & Bas van der Klaauw & Jan C. van Ours, 2004. "Punitive Sanctions and the Transition Rate from Welfare to Work," Journal of Labor Economics, University of Chicago Press, vol. 22(1), pages 211-241, January.
- Berg, Gerard J. van den & Klaauw, Bas van der & Ours, Jan C. van, 1998. "Punitive sanctions and the transition rate from welfare to work," Serie Research Memoranda 0033, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
- van den Berg, Gerard J & van der Klaauw, Bas & van Ours, Jan C, 2000. "Punitive Sanctions and the Transition Rate From Welfare to Work," CEPR Discussion Papers 2447, C.E.P.R. Discussion Papers.
- Hanming Fang & Dan Silverman, 2004.
"Time-inconsistency and Welfare Program Participation: Evidence from the NLSY,"
Cowles Foundation Discussion Papers
1465, Cowles Foundation for Research in Economics, Yale University.
- Hanming Fang & Dan Silverman, 2009. "Time-Inconsistency And Welfare Program Participation: Evidence From The Nlsy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(4), pages 1043-1077, November.
- Hanming Fang & Dan Silverman, 2007. "Time-Inconsistency and Welfare Program Participation: Evidence from the NLSY," NBER Working Papers 13375, National Bureau of Economic Research, Inc.
- David Laibson & Andrea Repetto & Jeremy Tobacman, 2000.
"A Debt Puzzle,"
NBER Working Papers
7879, National Bureau of Economic Research, Inc.
- Uri Benzion & Amnon Rapoport & Joseph Yagil, 1989. "Discount Rates Inferred from Decisions: An Experimental Study," Management Science, INFORMS, vol. 35(3), pages 270-284, March.
- Ted O' Donoghue and Matthew Rabin., 2000.
"Choice and Procrastination,"
Economics Working Papers
E00-281, University of California at Berkeley.
- Ted O' Donoghue & Matthew Rabin, 2001. "Choice and Procrastination," Microeconomics 0012002, EconWPA.
- O'Donoghue, Ted & Rabin, Matthew, 2000. "Choice and Procrastination," Department of Economics, Working Paper Series qt5r26k54p, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Blau, David M & Robins, Philip K, 1990. "Job Search Outcomes for the Employed and Unemployed," Journal of Political Economy, University of Chicago Press, vol. 98(3), pages 637-655, June.
- Christopher Harris & David Laibson, 1999.
"Dynamic Choices of Hyperbolic Consumers,"
Harvard Institute of Economic Research Working Papers
1886, Harvard - Institute of Economic Research.
- Gary Koop & Dale J. Poirier, 2001. "Testing for optimality in job search models," Econometrics Journal, Royal Economic Society, vol. 4(2), pages 1-6.
- George-Marios Angeletos, 2001. "The Hyberbolic Consumption Model: Calibration, Simulation, and Empirical Evaluation," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 47-68, Summer.
- Winkelmann, Liliana & Winkelmann, Rainer, 1998. "Why Are the Unemployed So Unhappy? Evidence from Panel Data," Economica, London School of Economics and Political Science, vol. 65(257), pages 1-15, February.
- Lancaster, Tony, 1997. "Exact Structural Inference in Optimal Job-Search Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(2), pages 165-179, April.
- Jonathan Gruber & Botond Koszegi, 2000. "Is Addiction "Rational"? Theory and Evidence," NBER Working Papers 7507, National Bureau of Economic Research, Inc.
- David I. Laibson & Andrea Repetto & Jeremy Tobacman, 1998. "Self-Control and Saving for Retirement," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(1), pages 91-196.
- Oswald, Andrew, 1997.
"Happiness and Economic Performance,"
The Warwick Economics Research Paper Series (TWERPS)
478, University of Warwick, Department of Economics.
- Bruce D. Meyer, 1995. "Lessons from the U.S. Unemployment Insurance Experiments," Journal of Economic Literature, American Economic Association, vol. 33(1), pages 91-131, March.
- Burdett, Kenneth & Ondrich, Jan I, 1985. "How Changes in Labor Demand Affect Unemployed Workers," Journal of Labor Economics, University of Chicago Press, vol. 3(1), pages 1-10, January.
- Diamond, Peter & Koszegi, Botond, 2003. "Quasi-hyperbolic discounting and retirement," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 1839-1872, September.
- Lippman, Steven A & McCall, John J, 1976. "The Economics of Job Search: A Survey," Economic Inquiry, Western Economic Association International, vol. 14(3), pages 347-368, September.
- 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.
- repec:rus:hseeco:93730 is not listed on IDEAS
When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp997. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak)
If references are entirely missing, you can add them using this form.