Estimating the Dynamics of Time and Risk Preferences in the Bulgarian Labour Market
Estimating the Dynamics of Time and Risk Preferences in the Bulgarian Labour Market

Summary/Abstract: The aim of this article is to present dynamic estimates of the discount factor and the coefficient of relative risk aversion for the Bulgarian labour market, using an innovative quantitative approach. For this purpose, we use a modified version of McCall's job search model. Our estimates for the period 2004-2024 reveal four distinct, structural phenomena: (i) a pro-cyclical discount factor, (ii) a counter-cyclical coefficient of relative risk aversion, (iii) a marked divergence between the behavioural parameters of the mean and median worker, and (iv) relatively low estimates for the parameters of interest compared to other economies. Based on these results, the article draws conclusions about the basic characteristics of the labour market in Bulgaria and proposes relevant policies.

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