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

Luca Flabbi and James Mabli ()
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Luca Flabbi and James Mabli: Department of Economics, Georgetown University, https://sites.google.com/site/lucaflabbi/

Authors registered in the RePEc Author Service: Luca Flabbi

Working Papers from Georgetown University, Department of Economics

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.

Keywords: Household Search; Inequality; Structural Estimation (search for similar items in EconPapers)
JEL-codes: J64 D63 C63 (search for similar items in EconPapers)
Date: 2012-01-03
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