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Recessions, expectations, and labor supply dynamics

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  • Maurizio Bovi
  • Massimo Mancini

Abstract

We examine how expectations on macroeconomic evolutions affect as many as twelve different labor market status transitions in bad economic times. Such a refined analysis of job search frequencies highlights intriguing findings. In bad economic times, e.g. to make up for the loss in family income, not-working agents would like to work. On the other hand, individuals are somewhat discouraged by the deteriorated expectations and they exert only a limited search effort. This latter turns out to be insufficient to find work in poor labor markets. All in all, the evidence pins down the widespread presence of “timid” responses, depicting a hybrid picture that hardly can be related to one single theoretical approach. Specifically, our findings suggest refining the standard dichotomic setting behind the discouraged worker and added worker literature. Results are based on a battery of multinomial logit models and controlled for several individual-level and aggregate variables. Copyright Springer Science+Business Media Dordrecht 2016

Suggested Citation

  • Maurizio Bovi & Massimo Mancini, 2016. "Recessions, expectations, and labor supply dynamics," Quality & Quantity: International Journal of Methodology, Springer, vol. 50(2), pages 653-671, March.
    • Handle: RePEc:spr:qualqt:v:50:y:2016:i:2:p:653-671
    DOI: 10.1007/s11135-015-0169-1
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    More about this item

    Keywords

    Expectations; Labor supply dynamics; Survey data ; Job search; D84; J21; J64;
    All these keywords.

    JEL classification:

    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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