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Job Amenity Shocks and Labor Reallocation

Author

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  • Bagga, Sadhika
  • Mann, Lukas
  • Sahin, Aysegul
  • Violante, Giovanni L.

Abstract

We develop an equilibrium model to study the dynamic adjustment of a frictional labor market to aggregate shifts in the demand and supply of a job amenity. When preferences for the amenity are heterogeneous in the population, and its availability is heterogeneous across jobs, labor reallocation ensues. The defining traits of such reallocation (a rise in vacancies and job-to-job transitions, a fall in matching efficiency and in relative wages of jobs supplying the amenity) closely resemble those observed in the post-pandemic U.S. labor market in the aftermath of the shift to remote work. A version of the model calibrated to the U.S. experience matches the data well with shocks of plausible magnitude. Cross-sectional and survey data from various sources offer support for this mechanism.

Suggested Citation

  • Bagga, Sadhika & Mann, Lukas & Sahin, Aysegul & Violante, Giovanni L., 2025. "Job Amenity Shocks and Labor Reallocation," CEPR Discussion Papers 20195, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:20195
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    File URL: https://cepr.org/publications/DP20195
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    Keywords

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    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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