Impatient in experiments, but patient in simulations: a challenge to the heckman-type model

Intertemporal labour–leisure choice models typically assume agents have a very low degree of impatience. Yet there is a lot of empirical evidence indicating a high degree of impatience. Using a life-cycle model of consumption–saving and labour–leisure choice, we show that even if an agent displays a relatively moderate degree of impatience, his labour supply choice delivers highly counterfactual patterns. We resolve this counterfactual finding by augmenting the standard model with a time-dependent marginal utility of leisure assumption that is consistent with some recent evidences from leisure studies. We also introduce various extensions and discuss their relative importance and associated challenges.