On the positive correlation between income and patience

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2006-03
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This paper uses a standard job-search model to provide a new explanation for the empirically documented positive correlation between patience and average income: more patient workers, by rejecting less favorable wage offers, end up with a higher average income in the long run. This is not clear at first glance, since rejecting more offers also leads to more time of unemployment. It turns out that more patient workers always “in in the end”. The result is proved for the case of a linear utility. When utility is not linear, a sufficiency condition is provided. Average utility always increases with patience. A counterexample is used to show that such conclusions could not follow from a direct analysis of the value function. A second example is offered at the end to illustrate the main points of the paper.


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