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

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  • Campbell, Carl M.

Abstract

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.

Suggested Citation

  • Campbell, Carl M., 2011. "The formation of wage expectations in the effort and quit decisions of workers," MPRA Paper 31590, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:31590
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    References listed on IDEAS

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    Cited by:

    1. Andrea Vaona, 2015. "The price-price Phillips curve in small open economies and monetary unions: theory and empirics," International Economics and Economic Policy, Springer, vol. 12(2), pages 281-307, June.
    2. Campbell, Carl, 2011. "Efficiency wage setting, labor demand, and Phillips curve microfoundations," MPRA Paper 34121, University Library of Munich, Germany.

    More about this item

    Keywords

    Imperfect information; Wage expectations;

    JEL classification:

    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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