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The formation of wage expectations in the effort and quit decisions of workers

  • Campbell, Carl M.

While much work in macroeconomics considers the formation of price expectations, there has been relatively little work analyzing wage expectations. This study develops models in which workers form expectations of average wages in choosing levels of effort and on-the-job search, under the assumption that information on lagged average wages is free but other information is costly. Under reasonable conditions, workers’ expectations are likely to be at least partly adaptive. It is argued that wage expectations may be more important than price expectations in explaining unemployment fluctuations.

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File URL: http://mpra.ub.uni-muenchen.de/43953/1/MPRA_paper_43953.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 31590.

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Date of creation: 15 Jun 2011
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Handle: RePEc:pra:mprapa:31590
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  1. Blundell, Richard & Macurdy, Thomas, 1999. "Labor supply: A review of alternative approaches," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 27, pages 1559-1695 Elsevier.
  2. Pfajfar, Damjan & Santoro, Emiliano, 2010. "Heterogeneity, learning and information stickiness in inflation expectations," Journal of Economic Behavior & Organization, Elsevier, vol. 75(3), pages 426-444, September.
  3. Campbell III, Carl M., 2010. "Deriving the wage-wage and price-price Phillips curves from a model with efficiency wages and imperfect information," Economics Letters, Elsevier, vol. 107(2), pages 242-245, May.
  4. N. Gregory Mankiw & Ricardo Reis & Justin Wolfers, 2003. "Disagreement about Inflation Expectations," NBER Working Papers 9796, National Bureau of Economic Research, Inc.
  5. Paul Levine & Joseph Pearlman & George Perendia & Bo Yang, 2010. "Endogenous Persistence in an Estimated DSGE Model under Imperfect Information," School of Economics Discussion Papers 0310, School of Economics, University of Surrey.
  6. Baghestani, Hamid & Noori, Esmail, 1988. "On the rationality of the Michigan monthly survey of inflationary expectations," Economics Letters, Elsevier, vol. 27(4), pages 333-335.
  7. Solow, Robert M., 1979. "Another possible source of wage stickiness," Journal of Macroeconomics, Elsevier, vol. 1(1), pages 79-82.
  8. John M. Roberts, 1998. "Inflation expectations and the transmission of monetary policy," Finance and Economics Discussion Series 1998-43, Board of Governors of the Federal Reserve System (U.S.).
  9. Campbell, Carl M, III & Kamlani, Kunal S, 1997. "The Reasons for Wage Rigidity: Evidence from a Survey of Firms," The Quarterly Journal of Economics, MIT Press, vol. 112(3), pages 759-89, August.
  10. Campbell III, Carl M., 2006. "A model of the determinants of effort," Economic Modelling, Elsevier, vol. 23(2), pages 215-237, March.
  11. Jeffrey C. Fuhrer, 1995. "The [un]importance of forward-looking behavior in price specifications," Working Papers 95-6, Federal Reserve Bank of Boston.
  12. Roberts, John M., 1997. "Is inflation sticky?," Journal of Monetary Economics, Elsevier, vol. 39(2), pages 173-196, July.
  13. N. Gregory Mankiw & Ricardo Reis, 2002. "Sticky Information Versus Sticky Prices: A Proposal To Replace The New Keynesian Phillips Curve," The Quarterly Journal of Economics, MIT Press, vol. 117(4), pages 1295-1328, November.
  14. Mullineaux, Donald J, 1980. "Inflation Expectations and Money Growth in the United States," American Economic Review, American Economic Association, vol. 70(1), pages 149-61, March.
  15. Gramlich, Edward M, 1983. "Models of Inflation Expectations Formation: A Comparison of Household and Economist Forecasts," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 15(2), pages 155-73, May.
  16. Lloyd B. Thomas, 1999. "Survey Measures of Expected U.S. Inflation," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 125-144, Fall.
  17. Akerlof, George A, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, MIT Press, vol. 97(4), pages 543-69, November.
  18. Salop, Steven C, 1979. "A Model of the Natural Rate of Unemployment," American Economic Review, American Economic Association, vol. 69(1), pages 117-25, March.
  19. Akerlof, George A & Yellen, Janet L, 1990. "The Fair Wage-Effort Hypothesis and Unemployment," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 255-83, May.
  20. David Card, 1990. "Intertemporal Labor Supply: An Assessment," Working Papers 649, Princeton University, Department of Economics, Industrial Relations Section..
  21. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  22. Christopher D Carroll, 2002. "Macroeconomic Expectations of Households and Professional Forecasters," Economics Working Paper Archive 477, The Johns Hopkins University,Department of Economics.
  23. Stiglitz, Joseph E, 1974. "Alternative Theories of Wage Determination and Unemployment in LDC'S: The Labor Turnover Model," The Quarterly Journal of Economics, MIT Press, vol. 88(2), pages 194-227, May.
  24. Batchelor, Roy A & Dua, Pami, 1989. "Household versus Economist Forecasts of Inflation: A Reassessment: A Note," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 21(2), pages 252-57, May.
  25. Schlicht, Ekkehart, 1978. "Labour Turnover, Wage Structure, and Natural Unemployment," Munich Reprints in Economics 1255, University of Munich, Department of Economics.
  26. Lars Ljungqvist & Thomas J. Sargent, 2004. "Recursive Macroeconomic Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 026212274x, June.
  27. Campbell, Carl M., 2009. "An efficiency wage - imperfect information model of the aggregate supply curve," MPRA Paper 15296, University Library of Munich, Germany.
  28. Conlisk, John, 1988. "Optimization cost," Journal of Economic Behavior & Organization, Elsevier, vol. 9(3), pages 213-228, April.
  29. Sethi, Rajiv & Franke, Reiner, 1995. "Behavioural Heterogeneity under Evolutionary Pressure: Macroeconomic Implications of Costly Optimisation," Economic Journal, Royal Economic Society, vol. 105(430), pages 583-600, May.
  30. Lucas, Robert E, Jr, 1973. "Some International Evidence on Output-Inflation Tradeoffs," American Economic Review, American Economic Association, vol. 63(3), pages 326-34, June.
  31. Evans, George & Gulamani, Riyaz, 1984. "Tests for Rationality of the Carlson-Parkin Inflation Expectations Data," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 46(1), pages 1-19, February.
  32. Weiss, Andrew W, 1980. "Job Queues and Layoffs in Labor Markets with Flexible Wages," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 526-38, June.
  33. Campbell, Carl III, 1995. "A cross-industry time-series analysis of quits," The Quarterly Review of Economics and Finance, Elsevier, vol. 35(1), pages 53-72.
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