Time preferences and career investments

This paper examines the role of time preferences in career investments. We focus on the effects of patience on two types of career investments: work effort and on-the-job search. Whereas the former increases the probability of obtaining a promotion, the latter affects the chance of receiving an outside job offer. We propose a theoretical career model which allows for these two distinct career paths. To test the theoretical predictions, we make use of the DNB Household Survey. This large Dutch longitudinal survey contains detailed information on individual time preferences, on-the-job search behaviour and indicators of work effort. The results show that on-the-job search and work effort increase with patience. The relation between patience and job mobility is more ambiguous. These findings may be hard to reconcile with standard on-the-job search models but can be rationalized by models in which work effort and on-the-job search are substitutes.

Netspar, Network for Studies on Pensions, Aging and Retirement, is a thinktank and knowledge network. Netspar is dedicated to promoting a wider understanding of the economic and social implications of pensions, aging and retirement in the Netherlands and Europe.

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