Monitoring Job Search Effort with Hyperbolic Time Preferences and Non-Compliance: A Welfare Analysis

Bart Cockx, Corinna Ghirelli and Bruno Van der Linden

No 7266, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper develops a partial equilibrium job search model to study the behavioral and welfare implications of an Unemployment Insurance (UI) scheme in which job search requirements are imposed on UI recipients with hyperbolic preferences. We show that, if the search requirements are well chosen, a perfect monitoring scheme can in principle increase the job finding rate and, contrary to what happens with exponential discounting, it can raise the expected lifetime utility of the current and future selves of sophisticated hyperbolic discounters. The same holds for naive agents if the welfare criterion ignores their misperception problem. In sum, introducing a perfect monitoring scheme can be a Pareto improvement. However, if claimants have the opportunity to withdraw from the UI scheme, their long-run utility can even be lower than in the absence of job search requirements. Imperfections in the measurement of job-search effort further reduce the chances that monitoring raises the welfare of the unemployed.

Keywords: job search model; job search monitoring; non-compliance; hyperbolic discounting; social efficiency (search for similar items in EconPapers)
JEL-codes: D60 D90 J64 J65 J68 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2013-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Published - revised version published as 'Is it Socially Efficient to Impose Job Search Requirements on Unemployed Benefit Claimants with Hyperbolic Preferences?' in: Journal of Public Economics , 2014, 113, 80-95

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Related works:
Working Paper: Monitoring Job Search Effort with Hyperbolic Time Preferences and Non-Compliance: A Welfare Analysis (2013)
Working Paper: Monitoring Job Search Effort with Hyperbolic Time Preferences and Non-Compliance: A Welfare Analysis (2013)
Working Paper: Monitoring Job Search Effort with Hyperbolic Time Preferences and Non-Compliance: A Welfare Analysis (2013)
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