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

44 Pages Posted: 16 Mar 2013 Last revised: 16 Apr 2023

See all articles by Bart Cockx

Bart Cockx

Ghent University - Department of Economics; Institute for the Study of Labor (IZA); CESifo (Center for Economic Studies and Ifo Institute); IRES, Université Catholique de Louvain; ROA Maastricht University

Corinna Ghirelli

Bank of Spain

Bruno Van der Linden

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

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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

JEL Classification: D60, D90, J64, J65, J68

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. IZA Discussion Paper No. 7266, Available at SSRN: https://ssrn.com/abstract=2234328 or http://dx.doi.org/10.2139/ssrn.2234328

Bart L. W. Cockx (Contact Author)

Ghent University - Department of Economics ( email )

Ghent, B-9000
Belgium

Institute for the Study of Labor (IZA)

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Bonn, D-53072
Germany

CESifo (Center for Economic Studies and Ifo Institute)

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IRES, Université Catholique de Louvain

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ROA Maastricht University ( email )

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Corinna Ghirelli

Bank of Spain ( email )

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Spain

Bruno Van der Linden

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

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Belgium

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

IZA Institute of Labor Economics

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Bonn, D-53072
Germany

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