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Worker Identity, Employment Fluctuations and Stabilization Policy

Author

Listed:
  • Snower, Dennis J.

    (Hertie School of Governance)

  • Lechthaler, Wolfgang

    (Kiel Institute for the World Economy)

Abstract

This paper provides a model of "social hysteresis" whereby long, deep recessions demotivate workers and thereby lead them to change their work ethic. In switching from a pro-work to an anti-work identity, their incentives to seek and retain work fall and consequently their employment chances fall. In this way, temporary recessions may come to have permanent effects on aggregate employment. We also show that these permanent effects, along with the underlying identity switches, can be avoided through stabilization policy. The size of the government expenditure multiplier can be shown to depend on the composition of identities in the workforce.

Suggested Citation

  • Snower, Dennis J. & Lechthaler, Wolfgang, 2013. "Worker Identity, Employment Fluctuations and Stabilization Policy," IZA Discussion Papers 7413, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp7413
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Recession & work ethics
      by chris dillow in Stumbling and Mumbling on 2013-06-18 18:27:00

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    More about this item

    Keywords

    economics of identity; work ethic; hysteresis; business cycle policy;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J28 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Safety; Job Satisfaction; Related Public Policy

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