Seminar February 25th at 1pm

Speaker: Luca Flabbi, IDB, Georgetown University and IZA

"Household Search or Individual Search: Does It Matter? Evidence from Lifetime Inequality Estimates"

Abstract: 

Search Models of the labor market are widespread and influential but they usually ignore that labor market decisions are frequently made at the household level. We fill this gap by developing and estimating a household search model with on-the-job search and labor supply. We build on previous work (Dey and Flinn (2008) and Guler, Guvenen and Violante (2011)) to propose a novel identification strategy of the risk aversion parameters and a specification test. We find that ignoring the household as unit of decision-making has relevant empirical consequences. In estimation, the individual search specification implies gender wage offers differentials twice as large than the household search specification. In the application, the individual search specification implies gender differentials in lifetime utility inequality 74% larger. The results of our policy experiments also emphasize the importance of looking at lifetime utility inequality measures as opposed to simply cross-sectional wage inequality measures.
JEL Codes: J64; D63; C63

On behalf of

Battista Severgnini, Associate Professor
bs.eco@cbs.dk  and

Cedric Schneider, Associate Professor
csc.eco@cbs.dk