Job Search and Hyperbolic Discounting

Falk Institute for Econ. Res. Working Paper No. 00.15

59 Pages Posted: 27 Jan 2001

See all articles by Stefano DellaVigna

Stefano DellaVigna

University of California, Berkeley; National Bureau of Economic Research (NBER)

M. Daniele Paserman

Hebrew University of Jerusalem - Department of Economics; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Date Written: September 2000

Abstract

We propose a simple test of hyperbolic versus exponential preferences in a job search model. More impatient workers search less intensively but also accept lower wages. If agents have hyperbolic preferences, the search effect dominates, so increases in impatience lead to lower exit rates from unemployment. The opposite is generally true for agents with exponential preferences: more impatient workers exit unemployment sooner.

Using two large longitudinal data sets, we find that various measures of impatience are negatively correlated with the exit rate from unemployment, contrary to the predictions of the exponential discounting model. A human capital story does not explain the results either. The empirical findings support the hyperbolic model.

JEL Classification: A12, C41, C73, D90, J64

Suggested Citation

DellaVigna, Stefano and Paserman, M. Daniele, Job Search and Hyperbolic Discounting (September 2000). Falk Institute for Econ. Res. Working Paper No. 00.15, Available at SSRN: https://ssrn.com/abstract=257949 or http://dx.doi.org/10.2139/ssrn.257949

Stefano DellaVigna (Contact Author)

University of California, Berkeley ( email )

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National Bureau of Economic Research (NBER)

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M. Daniele Paserman

Hebrew University of Jerusalem - Department of Economics ( email )

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Centre for Economic Policy Research (CEPR)

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United Kingdom

IZA Institute of Labor Economics

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