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

43 Pages Posted: 16 Apr 2013

See all articles by Bart Cockx

Bart Cockx

Ghent University - Sherppa - Faculty of Economics and Business Administration; IRES, Université Catholique de Louvain; Institute for the Study of Labor (IZA); CESifo (Center for Economic Studies and Ifo Institute)

Corinna Ghirelli

Bank of Spain

Bruno Van der Linden

Université Catholique de Louvain - Institut de Recherches Economiques et Sociales; IZA Institute of Labor Economics

Multiple version iconThere are 2 versions of this paper

Date Written: April 16, 2013

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 naïve 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

JEL Classification: D600, D900, J640, J650, J680

Suggested Citation

Cockx, Bart L. W. and Ghirelli, Corinna and Van der Linden, Bruno, Monitoring Job Search Effort with Hyperbolic Time Preferences and Non-Compliance: A Welfare Analysis (April 16, 2013). CESifo Working Paper Series No. 4187. Available at SSRN: https://ssrn.com/abstract=2251795

Bart L. W. Cockx (Contact Author)

Ghent University - Sherppa - Faculty of Economics and Business Administration ( email )

Ghent, B-9000
Belgium

IRES, Université Catholique de Louvain

Place Montesquieu, 3
Louvain-la-Neuve
Belgium

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Corinna Ghirelli

Bank of Spain ( email )

Calle Alcala, 48
Madrid, 28014
Spain

Bruno Van der Linden

Université Catholique de Louvain - Institut de Recherches Economiques et Sociales ( email )

3, Place Montesquieu
Louvain-la-Neuve, 1348
Belgium

HOME PAGE: http://perso.uclouvain.be/bruno.vanderlinden/

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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