Pasting Feathers Together and Hoping for a Duck
Daniel W. Drezner Needs to Watch "Apocalypse Now"

I'm Sorry I'll Miss This

I'll be watching the sixteen-year-old run cross-country. But this looks to be a really great seminar:

Econ 291: Department Seminar: Wednesday September 27: 4-6 PM, Evans 608-7:

David Card, Raj Chetty, and Andrea Weber (2006), "Does Cash-in-Hand Matter?: New Evidence from the Labor Market"

Abstract: This paper provides new evidence on the effects of cash-in-hand on household behavior. Using sharp discontinuities in eligibility for severance pay and extended unemployment benefits in Austria, combined with data on over one-half million job losers, we reach three main findings:

  1. A lump-sum severance payment equal to two months of wages lowers the rate of new job finding by 8-12% on average.
  2. An extension of the potential duration of UI benefits from 20 weeks to 30 weeks lowers job-finding rates in the first 20 weeks by 6-10%.
  3. The increases in the duration of job search induced by both programs have no effect on job match quality, as measured by wages or the duration of the next job.

We use a job search model to show how these estimates can distinguish between commonly-used models of household behavior, and develop a metric that can be used to calibrate such models to match our empirical findings. Our empirical findings are inconsistent with a simple permanent-income model as well as rule-of-thumb models with a myopic agent. The results favor a model where agents are forward-looking yet have limited ability to smooth consumption.