a rank dependent utility model of uncertain lifetime abstract in a continuous time life cycle model of consumption with an uncertain lifetime we use a non parametric specification of rank dependent utility theory to characterize the preferences of the agent we prove that time consistency holds for a subclass of probability weighting function providing the foundation for a constant rate of time preference that interacts multiplicatively with the hazard rate instead of additively as in the yaari 1965 seminal model we calibrate both models to explain the hump in the life cycle consumption and show that the multiplicative model is more robust

life cycle consumption and hyperbolic discount functions abstract studies of animal and human behavior suggest that discount functions are approximately hyperbolic ainslie picoeconomics 1992 hyperbolic models explain a wide range of empirical anomalies including 1 missing precautionary savings effects 2 incongruence between the elasticity of intertemporal substitution and the inverse of the coefficient of relative risk aversion 3 consumption discontinuities at retirement 4 variation in patience over the life cycle 5 consumer self reports of undersaving 6 disproportionate retirement accumulation in illiquid assets 7 asset specific marginal propensities to consume and 8 declining national savings rates in developed countries hyperbolic models also provide a new framework for analyzing the welfare gains that come from pro saving policies like social security and tax deferred retirement accounts

jobless spells and re employment wages many studies of job loss attribute the earnings losses associated with layoffs to the loss of job occupation and industry specific human capital this paper estimates the effect of jobless spells on post layoff wages using data from the 1984 panel of survey on income participation for a sample of adult white male workers who were permanently laid off between 1974 and 1984 the estimated impact of jobless spells on starting wages and survey date wages several years after re employment are controlled for separations layoffs and quits and for individual and job characteristics the estimates show that jobless spell durations reduce starting wages wage growth in the new job is lower for workers who experience long spell durations a result that suggests acceptance of jobs which are poor matches compared to other workers who spend less time out of work following a layoff the findings support labour force policies which minimize the amount of time a person is out of work

the hyperbolic consumption model calibration simulation and empirical evaluation ur preferences for the long run tend to conflict with our short run behavior when planning for the long run we intend to meet our deadlines exercise regularly and eat healthfully but in the short run we have little interest in revising manuscripts jogging on the stairmaster and skipping the chocolate souffleala mode delay of gratification is a nice long term goal but instant gratification is disconcertingly tempting this gap between long run intentions and short run actions is apparent across a wide range of behaviors including saving choices a 1997 survey found that 76 percent of respondents believe they should be saving more for retirement looking only at respondents who believed they were at an age where you should be seriously saving already the survey found that 55 percent reported being behind in their savings and only 6 percent reported being ahead farkas and johnson 1997 the report on the survey concluded t he gaps between people s atti tudes intentions and behavior are troubling and threaten increased insecurity and dissatisfaction for people when they retire americans are simply not doing what logic and their own reasoning suggests they should be doing a 1993 luntz webber merrill lynch survey found similar answers when baby boomers were asked what percentage of your annual household income do you think you should save for retirement and what percentage of your annual

residential mobility with job location uncertainty abstract this paper investigates the relationship between job changes and residential mobility a job change may be prompted by reasons unrelated to factors associated with housing consumption however a job change may lead to an adjustment to housing consumption i e residential relocation previous studies find that job relocations are positively associated with residential mobility this paper departs from previous studies by looking at the effects of an uncertain future job location on residential mobility and mobility expectation it is conjectured that with the existence of costs of residential mobility a household head s likelihood for changing jobs in the future dampens the household s propensity to move but encourages the formation of mobility expectation these conjectures are examined empirically using data from the panel study of income dynamics and they are confirmed

time tradeoff sequences for analyzing discounting and time inconsistency this paper introduces time tradeoff tto sequences as a general tool to analyze intertemporal choice we give several applications for empirical purposes we can measure discount functions without requiring any measurement of or assumption about utility we can quantitatively measure time inconsistencies and simplify their qualitative tests tto sequences can be administered and analyzed very easily using only pencil and paper for theoretical purposes we use tto sequences to axiomatize quasi hyperbolic discount functions we demonstrate the feasibility of measuring tto sequences in an experiment in which we tested the axiomatizations our findings suggest rejections of several currently popular discount functions and call for the development of new ones it is especially desirable that such discount functions can accommodate increasing impatience

survival ambiguity and welfare abstract nearly all life cycle models adopt yaari s 1965 assumption that individuals know the survival probabilities that they face given that an individual s exact survival probabilities are likely unknown we explore the implications of relaxing this assumption if there is no annuity market then the welfare cost of survival ambiguity is large and regressive ambiguity neutral individuals would pay as much as 1 of total lifetime consumption for immediate resolution of ambiguity and the bottom income quintile is 4 times worse off than the top quintile alternatively with the availability of competitive annuity contracts survival ambiguity is welfare improving because it allows competitive insurance companies to pool risk across survival types even though social security and annuities share some properties social security does not help to hedge survival ambiguity

the wage effects of voluntary labor mobility with and without intervening unemployment this study investigates how an unemployment spell between jobs affects a job changer s new wages one hypothesis holds that the search and mobility costs associated with unemployment between jobs are compensated for by increased wage gains resulting from more intensive job search opposing hypotheses are that unemployed job changers are at a disadvantage because they have fewer job contacts than job changers who move directly from one job to another or because they are unable to gain new skills or develop good work habits while unemployed the results of this analysis of 1979 81 data from the national longitudinal survey of young men support the first hypothesis an unemployment spell between jobs is associated with wage gains higher than those obtained when the job change was made with no intervening unemployment

negligible senescence an economic life cycle model for the future abstract we propose a model of aging and health deficit accumulation model with an infinite time horizon and a steady state of constant health the time of death is uncertain and endogenous to lifestyle and health behavior this setup can be conceptualized as a strive for immortality that is never reached we discuss adjustment dynamics and show that the new setup is particularly useful to understand aging of the oldest old i e of individuals for which morbidity and mortality have reached a plateau we then show how the existence of a steady state can be used to perform comparative dynamics exercises analytically as an illustration we investigate the effects of more expensive health investment and of advances in medical technology on optimal short run and long run health behavior

differential mortality and social security this paper studies the normative problem of redistribution between individuals who differ in their lifespans we discuss aspects related to the objective function and argue that aversion to multiperiod inequality should be taken into account then we study the properties of the social optimum both with full information and with asymmetric information we highlight the role of aversion to multiperiod inequality and show that it has substantial consequences on the design of social security schemes in particular we show that for a low resp high aversion to multiperiod inequality a negative resp positive implicit tax rate on continued activity is desirable

is there one unifying concept of utility an experimental comparison of utility under risk and utility over time the nature of utility is controversial whereas decision theory commonly assumes that utility is context specific applied and empirical decision analysis typically assumes one unifying concept of utility applicable to all decision problems this controversy has hardly been addressed empirically because of the absence of methods to measure utility outside the context of risk we introduce a method to measure utility over time and compare utility under risk and utility over time we distinguish between gains and losses and also measure loss aversion in two experiments we found that utility under risk and utility over time differed and were uncorrelated utility under risk was more curved than utility over time subjects were loss averse both for risk and for time but loss aversion was more pronounced for risk loss aversion over risk and time were uncorrelated this suggests that loss aversion although important in both decision contexts is volatile and subject to framing

anomalies in intertemporal choice evidence and an interpretation research on decision making under uncertainly has been strongly influenced by the documentation of numerous expected utility eu anomalies behaviors that violate the expected utility axioms the relative lack of progress on the closely related topic of intertemporal choice is partly due to the absence of an analogous set of discounted utility du anomalies we enumerate a set of du anomalies analogous to the eu anomalies and propose a model that accounts for the anomalies as well as other intertemporal choice phenomena incompatible with du we discuss implications for savings behavior estimation of discount rates and choice framing effects

the excess sensitivity of layoffs and quits to demand excessive layoffs in bad times and excessive quits in good times both stem from the same weakness in practical employment arrangements the specific nature of worker firm relations creates a situat

the returns to mobility and job search by gender using data from the national longitudinal survey of youth the authors estimate the returns to job search mobility and the interaction of search and mobility for young men and women they find st

job mobility and gender based wage growth differentials i introduction evidence presented by goldin 1989 o neill 1985 and others shows that the gender wage gap is narrowing much of the narrowing has been attributed to changes in female employment behavior such as the increased consistency of labor force participation and investment in education however because wages are not yet equal questions remain for example does mobility play a role in the remaining wage gap in this paper we examine the role of mobility because this has been a relatively neglected area of interest for researchers concerned about the gender wage gap some evidence on gender differences in mobility and the returns to mobility has been presented but there is little consistency in the reported evidence keith and mcwilliams 1995 demonstrate that the mobility histories of young men and women differ significantly loprest 1992 reports that for a sample of individuals who worked full time for four consecutive years young men s wages grew twice as much when they changed jobs i e employers as young women s did however abbott and beach 1994 find that the wage effects of mobility for women are similar in magnitude to the gains that mincer 1986 and holmlund 1984 find for men given the sometimes conflicting results reported so far determining the extent and the cause of gender differences in wage mobility effects has important implications for gender wage gap arguments in this study we examine the patterns and the returns to mobility for young men and women to examine mobility patterns we disaggregate mobility into involuntary or employer initiated and voluntary or employee initiated separations we further disaggregate involuntary separations into layoffs and discharges and we further disaggregate voluntary separations into family related and non family related quits by examining the impact of each of these different types of job separation on wage growth and the difference in the relative frequency of each type of separation for men and women we can make inferences about the impact of early career mobility on the gender wage gap the remainder of this paper is organized as follows in section ii we review evidence on the returns to different types of mobility in section iii we present evidence on gender differences in mobility and wage growth we use data from the national longitudinal survey of youth nlsy to examine the mobility patterns of men and women and to calculate average wages and average wage growth in section iv we describe how we selected a sample and specified a model for estimating the determinants of wage growth in section v we examine the wage growth effects of different types of mobility controlling for starting wages and individuals fixed effects in section vi we discuss our conclusions ii the returns to different types of mobility workers change jobs for different reasons some voluntary and some involuntary there is some evidence that the returns to different types of mobility differ not surprisingly there is consistent evidence that employee initiated separations quits increase wage growth and that employer initiated separations layoffs and discharges decrease wage growth relative to staying with the same employer 1 additional evidence on the job mobility and wage growth of men has been offered as well bartel and borjas 1981 show that job related quits have a larger positive impact on wage growth than do non job related quits with the highest wage growth resulting from those quits that are associated with successful job shopping parsons 1989 shows that for young men an employer initiated separation with prejudice a discharge results in a larger wage penalty than an employer initiated separation without prejudice a layoff keith 1993 and keith and mcwilliams 1995 show that the number of previous discharges decreases and the number of previous job related quits increases the current wage for samples of young men

costly employment contract renegotiation and the labor mobility of young men the distinction of quits and permanent layoffs remains a contentious issue in the labor economics literature basically there appear two contrasting views of such turnover while both interpretations of turnover are derived from job matching models that assume wealth maximizing behavior of workers and firms each involves different assumptions about the feasibility of individual labor contract negotiations following hire on the one hand application of the coase theorem to employment contracts implies that turnover will occur only when the value of the worker s product in some alternative employment exceeds current job productivity since the actual division of the job match rent is assumed costlessly renegotiable only the presence of a truly more productive job assignment would prevent the renegotiation of the current rent sharing contract to the mutual benefit of both worker and firm the likelihood of a job change is thus directly related to the level of total match productivity irregardless of whether the worker in response to some later survey question characterizes the separation as a quit or permanent layoff according to this formulation of worker and firm attachments quits and permanent layoffs are at least in any sense relevant to actual resource allocation indistinguishable an implication of this model is of course that mobility enhances productivity see gary becker elisabeth landes and robert michael 1977 counter to this view stand models of job matching that suggest that the presence of transactions costs in the form of costly contract renegotiations preclude any easy application of the coase theorem to employment contracts most forcefully advocated by masanori hashimoto 1981 these models of job matching imply that quits and permanent layoffs are different the difference results from the fact that with costly contract renegotiation mobility is to a large extent determined by the actual rent sharing agreement formulated at the beginning of employment according to this view then the total value of the match does not exclusively determine job change and thus not all mobility is productivity augmenting this paper offers a model of job matching with costly post hire negotiations in some aspects similar to that of hashimoto but with particular relevance to the population of young workers only beginning their labor force participation while hashimoto s discussion concentrates on longer term firmspecific training decisions the current model focuses on the period immediately following hire when worker productivity is to a large extent governed by endowed capabilities rather than determined by learning on the job the theoretical focus on inexperienced workers as well as the corresponding youthful composition of the empirical sample are motivated to control for unobserved factors such as firm specific human capital stocks as much as possible in further contrast to hashimoto s emphasis the model yields empirical implications concerning the role of wages in the determination of mobility that contrast to the implications of an otherwise similar zero negotiations cost model of job matching derivation of the empirical implications concerning the relationship of wages to quits and layoffs represents the primary contribution of this paper finally empirical results are presented that at least for a sample of very young men over a short period of time department of economics university of houston houston tx 77004 i thank finis welch dan mitchell and the referee for comments on an earlier version of this paper

value functions for infinite period planning cost benefit and risk analysis studies that model tradeoffs between the present and the distant future by means of present value discounting have been criticized for according the future and thus future generations far too little importance this paper presents an alternative means of modeling tradeoffs between different periods that accords the future far more importance than present value discounting and that is no more difficult to apply the paper also presents a means of modeling the preference issue of concern for equity or stability between different periods

the wage effects of cumulative job mobility this analysis of data from the national longitudinal survey of youth shows that cumulative job mobility had statistically significant effects on wages in the years 1979 88 the direction of the wage effects positive or negative and their magnitude varied depending on the type of cumulative mobility examined employee initiated versus employerinitiated separations economic versus family related quits layoffs versus discharges the results also indicate that although men and women had different mobility histories men for example had been discharged more often than women and women had quit for family related reasons more often than men the wage effects of each type of cumulative mobility economic quits family related quits layoffs and discharges were similar for men and women tn this paper we examine the impact of cumulative job mobility on the subsequent wages of young men and women most previous work on this subject has focused on the impact of specific mobility events such as quits or layoffs rather than on the impact of total job history on wages researchers looking at single mobility decisions have consistently reported evidence that a change in employers does affect a worker s subsequent wage therefore it is reasonable to ask whether the impact ofjob change is cumulative that is does a worker s current wage reflect the impact of all past mobility decisions quits layoffs and discharges also since most of the

migration and employment after an economic shock regional characteristics and migration patterns this study addresses the migration dynamics of workers after their workplace has closed it analyses to what extent migration responses differ between regions with different characteristics for ind

measuring uncertainty about long run predictions long run forecasts of economic variables play an important role in policy planning and portfolio decisions we consider forecasts of the long horizon average of a scalar variable typically the growth rate of an economic variable the main contribution is the construction of prediction sets with asymptotic coverage over a wide range of data generating processes allowing for stochastically trending mean growth slow mean reversion and other types of long run dependencies we illustrate the method by computing prediction sets for 10 to 75 year average growth rates of u s real per capita gdp and consumption productivity price level stock prices and population jel classi cation c22 c53 e17

models as usual for unusual risks on the value of catastrophic climate change we study the role of alternative intertemporal preference representations in a model of economic growth stock pollutant and endogenous risk of catastrophic collapse we contrast the traditional discounted utility model which assumes risk neutrality with respect to intertemporal utility with a multiplicative choice model that displays risk aversion in that dimension first we show that both representations of preferences can rationalize the same business as usual economy for a given interest rate and no pollution externality second once we introduce a collapse risk whose hazard rate is a function of the pollution stock multiplicative preferences recommend a much more stringent policy response an illustration in the context of climate change indicates that switching to the multiplicative preference representation has a similar effect in terms of policy recommendations as scaling up the schedule of the hazard rate by a factor of 100

reputation voluntary mobility and wages this study analyzes the effect of voluntary mobility on subsequent wages to discover if there are wage penalties associated with repeated mobility to reduce the endogeneity between wages and voluntary mobility the sample is restricted to young males on their first job following a permanent layoff using respondents from the national longitudinal survey of youth ordinary least squares wage equations from the layoff sample are compared to those from a sample of workers who remained employed the evidence shows that voluntary mobility differentially affects the wage equations of the restricted and the unrestricted samples copyright 1993 by mit press

post migration earnings profiles an application of human capital and job search models several studies have noted that post migration earnings of migrants rise more rapidly than earnings of non migrants 13 42 9 human capital models would attempt to explain this by differences in the investment profiles of migrants and non migrants these differences could be due to migration selectivity whereby migrants have different investment incentives due to ability or motivation or to the loss of human capital by migrating and the recoupment of this capital after migration search models would explain this phenomenon by imperfect information migrants may have less information about wage distributions at the destination than non migrants enter the destination job market at a low wage and engage in subsequent post migration search for better earnings or as yezer and thurston 15 have suggested search may be selective and migrants whose reservation wages are not met after some time at the destination leave i e we observe migrants having steeper earnings profiles since those who do not obtain high earnings leave as one might expect neither of these pure models is alone sufficient to explain the factors that create the different earnings streams instead they can be viewed as complementary explanations the failure to recognize that migration involves both job search and human capital changes could lead to biased tests of hypotheses originating from only one model a good example of this and the one addressed in this paper is testing hypotheses regarding the source of differences between experience earnings profiles of migrants and non migrants for example yezer and thurston 15 establish and test the hypothesis that the distance migrated should be positively associated with income gains after migration they find the expected relation using regressions with a distance dummy 2 however it is well known that more educated individuals travel greater distances 11 and generally have steeper earnings profiles than less educated persons the correlation between education and distance migrated makes any test of the yezer and thurston hypothesis biased toward accepting their search model when education is not controlled

labour mobility and returns to experience in foreign firms this paper uses finnish linked employer employee panel data to study whether employees are able to appropriate returns to knowledge accumulated in foreign owned firms when moving to domestic firms the estimates indicate that highly educated employees earn a return to prior experience in a foreign owned firm which is over and above the return to other previous experience these employees do not appear to pay for the knowledge they accumulate in the form of lower starting wages in foreign owned firms

human capital investment specialization and the wage effects of voluntary labor mobility ahstract analyses of voluntary labor mobility suggest that job search facilitates job change while specific training inhibits mobility further given that specific skills cannot be transferred between jobs and since both search and training are costly it is reasonable for workers to specialize in search or specific training on a given job training or search specialization however implies that estimation methods which treat the incidence of a quit as exogenous underestimate mobility effects on wages the larger wage effects reported here result from simultaneous estimation but also reflect more accurate measurement of wage growth between jobs

longevity genes and efforts an optimal taxation approach to prevention this paper applies the analytical tools of optimal taxation theory to the design of the optimal subsidy on preventive behaviours in an economy where longevity varies across agents and depends on preventive expenditures and on longevity genes public intervention can be here justified on three grounds corrections for misperceptions of the survival process and for externalities related to individual preventive behaviour and redistribution across both earnings and genetic dimensions the optimal subsidy on preventive expenditures is shown to depend on the combined impacts of misperception externalities and self selection it is generally optimal to subsidize preventive efforts to an extent depending on the degree of individual myopia on how productivity and genes are correlated and on the complementarity of genes and preventive efforts in the survival function

uncertain lifetime and intertemporal choice risk aversion as a rationale for time discounting this article makes explicit the links between preferences over lotteries on length of life and intertemporal choice it shows that the approach used by traditional life cycle models to account for uncertain survival corresponds to a strong assumption of risk neutrality with respect to length of life relaxing such an assumption leads us to develop a more general formulation of lifetime utility in which time discounting is directly related to preferences over length of life exponential and hyperbolic discounting are found to result in a first approximation from constant and hyperbolic risk aversion with respect to length of life