Job Search and Hyperbolic Discounting: Structural Estimation and Policy Evaluation

By D. Paserman. Social Science Research Network, 2008

249 citations recorded by the source corpus.

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.

Subfields: Accounting, Economics and Econometrics, Gender Studies

View Paper: https://www.semanticscholar.org/paper/10d488ca2778cc690ec04b3094542d5abebea220

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Citations in the corpus

Labor Market Effects of Unemployment Insurance Design (2014, unknown): “Paserman They ﬁnd that the eﬀect of impatience on search eﬀort is negative and sizable while the eﬀect of impatience on reservation wages and re-employment wages is essentially zero.”
Exploiting Naïvete about Self-Control in the Credit Market (2010, background): “especially Renuart (2004) and as the logic of our model suggests, the high monthly payments or the balloon payment drive borrowers to refinance, and the high prepayment penalty—folded into the principal and financed—serves to make this profitable to the firm.”
Contract Design and Self-Control: Theory and Evidence (2004, result): “For benefits b in the range $20-$100, this implies a calibrated β in the range .7-.95, comparable to the estimates in the literature (Angeletos et al., 2001; Paserman, 2003).”
Time-Inconsistency and Welfare Program Participation: Evidence from the Nlsy (2009, unknown): “7 Laibson et al. (1998), Angeletos et al. (2001), Gruber and Koszegi (2001), Della Vigna and Paserman (2005), and Paserman (2008) are notable exceptions.”
Locus of control and the labor market (2015, unknown): “In particular, DellaVigna and Paserman (2005) and Paserman (2008) provide evidence that many job seekers have time inconsistent preferences, i.e., self-control issues, and as a result tend to procrastinate in searching for work.”
Learning about job search: A field experiment with job seekers in Germany (2015, background): “…suggests a tight theoretical and empirical link between a number of behavioral biases—specifically present bias, biases in probability judgments, and overconfidence—and longer unemployment duration (e.g., DellaVigna and Paserman 2005, Paserman 2008, Dohmen et al. 2009, and Spinnewijn 2015).”
A Reduced-Form Approach to Behavioral Public Finance (2012, background): “F or p er so na l u se o nl y. costs of medical treatment decisions, they may consume medical care at inefficiently high levels (Arrow 1963, Pauly 1968, Zeckhauser 1970).”
Behavioral Economics and Public Policy: A Pragmatic Perspective (2015, background): “The drawback – like structural estimation in neoclassical economics – is that it relies on strong modeling assumptions.31 This is well illustrated by Paserman (2008) and DellaVigna et al.’s (2014) work on unemployment benefit policy in behavioral models.”
Dynamic Quantile Models of Rational Behavior (2019, unknown): “This literature estimates discount factors by using a quasi-hyperbolic discount function (see, e.g., Paserman (2008), Fang and Silverman (2009), and Laibson, Maxted, Repetto, and Tobacman (2015)).”
Consumer Spending during Unemployment: Positive and Normative Implications (2019, unknown): “This pattern might be consistent with unobserved heterogeneity (Paserman 2008), duration dependence (Kroft et al.”
Revising Commitments: Field Evidence on the Adjustment of Prior Choices (2012, background): “This literature, which restricts itself to estimating quasi-hyperbolic discount functions, includes Laibson et al. (2007), Paserman (2008), and Fang and Silverman (2009).”