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Labor supply and the business cycle: The “bandwagon worker effectâ€

Author

Listed:
  • Martín†Román, à ngel L.
  • Cuéllar†Martín, Jaime
  • Moral, Alfonso

Abstract

The relationship between labour force participation and the business cycle is a common topic in economic literature. However, few studies have examined if the cyclical sensitivity of labour force participation is influenced by social effects. In this paper, we construct a theoretical model defining a relatively new hypothesis, the bandwagon worker effect (BWE). We use spatial econometrics techniques to test the existence of the BWE in the local labour markets in Spain. Our results reveal a positive spatial dependence in the cyclical sensitivity of labour force participation that decreases as we fix a laxer neighbourhood criterion, which verifies the existence of the BWE.

Suggested Citation

Handle: RePEc:eee:paresc:v:99:y:2020:i:6:p:1607-1643
DOI: 10.1111/pirs.12542
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JEL classification:

  • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
  • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
  • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
  • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
  • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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