Job Search and Hyperbolic Discounting: Structural Estimation and Policy Evaluation

M. Daniele Paserman

No 997, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: 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.

Keywords: structural estimation; policy evaluation; hyperbolic discounting; job search (search for similar items in EconPapers)
JEL-codes: C11 C41 (search for similar items in EconPapers)
Pages: 61 pages
Date: 2004-01
New Economics Papers: this item is included in nep-ltv
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

Published - published in: Economic Journal, 2008, 118 (531), 1418–1452

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Related works:
Journal Article: Job Search and Hyperbolic Discounting: Structural Estimation and Policy Evaluation (2008)
Journal Article: Job Search and Hyperbolic Discounting: Structural Estimation and Policy Evaluation (2008)
Working Paper: Job Search and Hyperbolic Discounting: Structural Estimation and Policy Evaluation (2004)
Working Paper: Job Search and Hyperbolic Discounting: Structural Estimation and Policy Evaluation (2004)
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