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

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  • Flabbi, Luca

    (University of North Carolina, Chapel Hill)

  • Mabli, James

    (Mathematica Policy Research)

Abstract

Search Models of the labor market are widespread and influential but they usually ignore that labor market decisions are frequently taken at the household level. We fill this gap by developing and estimating an 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 200% larger 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 emphasize the importance of looking at lifetime utility inequality measures as opposed to simply cross-sectional wage inequality measures.

Suggested Citation

  • Flabbi, Luca & Mabli, James, 2012. "Household Search or Individual Search: Does It Matter? Evidence from Lifetime Inequality Estimates," IZA Discussion Papers 6908, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp6908
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    Cited by:

    1. Christine Braun & Charlie Nusbaum & Peter Rupert, 2017. "Dual Job Search and Migration," 2017 Meeting Papers 789, Society for Economic Dynamics.
    2. Zaharieva, Anna, 2013. "Social welfare and wage inequality in search equilibrium with personal contacts," Labour Economics, Elsevier, vol. 23(C), pages 107-121.
    3. Valladares-Esteban, Arnau & Choi, Sekyu, 2016. "On households and unemployment insurance," Discussion Paper Series In Economics And Econometrics 1508, Economics Division, School of Social Sciences, University of Southampton.
    4. Guler, Bulent & Guvenen, Fatih & Violante, Giovanni L., 2012. "Joint-search theory: New opportunities and new frictions," Journal of Monetary Economics, Elsevier, vol. 59(4), pages 352-369.
    5. Zaharieva, Anna, 2015. "Social contacts and referrals in a labor market with on-the-job search," Labour Economics, Elsevier, vol. 32(C), pages 27-43.
    6. Mauring, Eeva, 2016. "A two-agent model of sequential search and choice," Journal of Economic Behavior & Organization, Elsevier, vol. 123(C), pages 122-137.

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    More about this item

    Keywords

    structural estimation; inequality; household search;
    All these keywords.

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques

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