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Do Emotions Improve Labor Market Outcomes?

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  • Lorenz Goette
  • David Huffman

Abstract

Traditionally, models of economic decision-making assume that individuals are rational and emotionless. This chapter argues that the neglect of emotion in economic models explains their inability to predict important aspects of the labor market. We focus on one example: the scarcity of nominal wage cuts. [IZA Discussion Paper No. 1895]

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Paper provided by eSocialSciences in its series Working Papers with number id:2743.

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Date of creation: Aug 2010
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Handle: RePEc:ess:wpaper:id:2743

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Keywords: wage rigidity; affect; emotions; money illusion; loss aversion;

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