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Hysteresis in an Evolutionary Labor Market with Adaptive Search

  • Leigh Tesfatsion

    (Iowa State University)

This study undertakes a systematic experimental investigation of hysteresis (path dependency) in an agent-based computational labor market framework. It is shown that capacity asymmetries between work suppliers and employers can result in two distinct hysteresis effects, network and behavioral, when work suppliers and employers interact strategically and evolve their worksite behaviors over time. These hysteresis effects result in persistent heterogeneity in earnings and employment histories across agents who have no observable structural differences. At a more global level, these hysteresis effects are shown to result in a one-to-many mapping between treatment factors and experimental outcomes. These hysteresis effects may help to explain why excess earnings heterogeneity is commonly observed in real-world labor markets.

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File URL: http://econwpa.repec.org/eps/comp/papers/0004/0004003.pdf
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Paper provided by EconWPA in its series Computational Economics with number 0004003.

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Length: 31 pages
Date of creation: 11 Nov 2000
Date of revision:
Handle: RePEc:wpa:wuwpco:0004003
Note: Type of Document - pdf; prepared on IBM PC - PC-TEX/; to print on HP/PostScript/; pages: 31; figures: included
Contact details of provider: Web page: http://econwpa.repec.org

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  1. Tesfatsion, Leigh, 1997. "How Economists Can Get Alife," Staff General Research Papers 1685, Iowa State University, Department of Economics.
  2. John M. Abowd & Francis Kramarz & David N. Margolis, 1999. "High Wage Workers and High Wage Firms," Econometrica, Econometric Society, vol. 67(2), pages 251-334, March.
  3. Tesfatsion, Leigh, 1998. "Preferential Partner Selection in Evolutionary Labor Markets: A Study in Agent-Based Computational Economics," Staff General Research Papers 2048, Iowa State University, Department of Economics.
  4. Diamond, Peter A, 1982. "Aggregate Demand Management in Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 881-94, October.
  5. Leigh TESFATSION, 1995. "A Trade Network Game With Endogenous Partner Selection," Economic Report 36, Iowa State University Department of Economics.
  6. McFadzean, David & Tesfatsion, Leigh, 1999. "A C++ Platform for the Evolution of Trade Networks," Computational Economics, Society for Computational Economics, vol. 14(1-2), pages 109-34, October.
  7. Piscitelli, Laura, et al, 2000. "A Test for Strong Hysteresis," Computational Economics, Society for Computational Economics, vol. 15(1-2), pages 59-78, April.
  8. Olivier J. Blanchard & Lawrence H. Summers, 1986. "Hysteresis and the European Unemployment Problem," NBER Chapters, in: NBER Macroeconomics Annual 1986, Volume 1, pages 15-90 National Bureau of Economic Research, Inc.
  9. Leigh Tesfatsion, 2002. "Agent-Based Computational Economics," Computational Economics 0203001, EconWPA, revised 15 Aug 2002.
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