Reference-Dependent Job Search : Evidence from Hungary

@inproceedings{DellaVigna2014ReferenceDependentJS,
  title={Reference-Dependent Job Search : Evidence from Hungary},
  author={Stefano DellaVigna and Attila Lindner and Bal{\'a}zs Reizer and Johannes F. Schmieder},
  year={2014}
}
We propose a model of job search with reference-dependent preferences, where the reference point is given by recent income. Newly unemployed individuals search hard given that they are at a loss, but over time they get used to lower income, and thus search less. They search harder again in anticipation of a benefit cut, only to ultimately get used to it. The model fits the typical shape of the exit from unemployment, including the spike at the UI exhaustion point. The model also makes unique… CONTINUE READING