Time Preferences and Career Investments

Abstract

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 modelwhich allows for these two distinct career paths. To test the theoretical predictions,wemake use of the DNB Household Survey. This largeDutch 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 andwork effort increasewith patience. The relation between patience and jobmobility ismoreambiguous. 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.