Working Paper: NBER ID: w10837
Authors: Stefano Dellavigna; M. Daniele Paserman
Abstract: How does impatience affect job search? More impatient workers search less intensively and set a lower reservation wage. The effect on the exit rate from unemployment is unclear. In this paper we show that, if agents have exponential time preferences, the reservation wage effect dominates for sufficiently patient individuals, so increases in impatience lead to higher exit rates. The opposite is true for agents with hyperbolic time preferences: more impatient workers search less and exit unemployment later. Using two large longitudinal data sets, we find that various measures of impatience are negatively correlated with search effort and the exit rate from unemployment, and are orthogonal to reservation wages. Overall, impatience has a large effect on job search outcomes in the direction predicted by the hyperbolic discounting model.
Keywords: job search; impatience; time preferences; unemployment
JEL Codes: A12; C41; C73; D90; J64
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| impatience (D84) | search effort (C90) |
| impatience (D84) | reservation wages (R21) |
| impatience (D84) | exit rate from unemployment (J65) |
| impatience (exponential) (C69) | exit rate from unemployment (J65) |
| impatience (hyperbolic) (D84) | exit rate from unemployment (J65) |
| search effort (C90) | exit rate from unemployment (J65) |
| reservation wages (R21) | exit rate from unemployment (J65) |