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Going the extra mile: Effort by workers and job-seekers

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  • Hertweck, Matthias S.
  • Lewis, Vivien
  • Villa, Stefania

Abstract

We introduce two types of effort into an otherwise standard labor search model to examine indeterminacy and sunspot equilibria. Variable labor effort gives rise to increasing returns to hours in production. This makes workers more valuable and contributes to self-fulfilling profit expectations, raising the likelihood of indeterminacy. Variable search effort makes workers search more intensively in a tighter labor market, which alleviates congestion and reduces the likelihood of indeterminacy. Indeterminacy disappears completely when vacancy posting costs are replaced with hiring costs.

Suggested Citation

  • Hertweck, Matthias S. & Lewis, Vivien & Villa, Stefania, 2019. "Going the extra mile: Effort by workers and job-seekers," Discussion Papers 29/2019, Deutsche Bundesbank.
  • Handle: RePEc:zbw:bubdps:292019
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    Cited by:

    1. Maarten Dossche & Andrea Gavazzi & Vivien Lewis, . "Labor Adjustment and Productivity in the OECD," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics.
    2. Maarten Dossche & Andrea Gavazzi & Vivien Lewis, . "Labor Adjustment and Productivity in the OECD," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics.
    3. Lewis, Vivien & Villa, Stefania & Wolters, Maik H., 2019. "Labor productivity, effort and the euro area business cycle," Discussion Papers 44/2019, Deutsche Bundesbank.

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    More about this item

    Keywords

    determinacy; effort; hours; labor market frictions; search intensity;
    All these keywords.

    JEL classification:

    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E64 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Incomes Policy; Price Policy
    • E71 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on the Macro Economy

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