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Labor Supply in Pandemic Environments: An Aggregative Games Approach

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  • Luciana C. Fiorini

    (Economics Department, Business School, The University of Western Australia)

  • Wilfredo L. Maldonado

    (University of Sao Paulo)

Abstract

In this paper we analyze the effects that pandemic processes have on labor supply decisions using an aggregative game framework. The individual payoff depends on her labor supply and on the probability of being infected, which in turn, depends on the aggregate labor supply. We show the effects of social and sanitary public policies on the Nash equilibrium and analyze its expectational stability. The results indicate that compensating policies as well as sanitary policies can attenuate the damaging effect of pandemic and stabilize expectations regarding the aggregate decision of labor supply. We also find a set of parameters where two-period cycles for the expectations revision map may arise, implying the oscillating behavior of the probability of contagion in this class of models.

Suggested Citation

  • Luciana C. Fiorini & Wilfredo L. Maldonado, 2022. "Labor Supply in Pandemic Environments: An Aggregative Games Approach," Economics Discussion / Working Papers 22-14, The University of Western Australia, Department of Economics.
    • Handle: RePEc:uwa:wpaper:22-14
    Note: MD5 = 328dfb2ccc697b521baeb178588457ff
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    References listed on IDEAS

    as
    1. Birinci, Serdar & Karahan, Fatih & Mercan, Yusuf & See, Kurt, 2021. "Labor market policies during an epidemic," Journal of Public Economics, Elsevier, vol. 194(C).
    2. Richard Cornes & Luciana C. Fiorini & Wilfredo L. Maldonado, 2021. "Expectational stability in aggregative games," Journal of Evolutionary Economics, Springer, vol. 31(1), pages 235-249, January.
    3. Aum, Sangmin & Lee, Sang Yoon (Tim) & Shin, Yongseok, 2021. "Inequality of fear and self-quarantine: Is there a trade-off between GDP and public health?," Journal of Public Economics, Elsevier, vol. 194(C).
    4. Eichenbaum, Martin S. & Rebelo, Sergio & Trabandt, Mathias, 2022. "The macroeconomics of testing and quarantining," Journal of Economic Dynamics and Control, Elsevier, vol. 138(C).
    5. Richard Cornes & Roger Hartley, 2007. "Aggregative Public Good Games," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 9(2), pages 201-219, April.
    6. Bradley, Jake & Ruggieri, Alessandro & Spencer, Adam Hal, 2021. "Twin Peaks: Covid-19 and the labor market," European Economic Review, Elsevier, vol. 138(C).
    7. Glaeser, Edward L. & Gorback, Caitlin & Redding, Stephen J., 2022. "JUE Insight: How much does COVID-19 increase with mobility? Evidence from New York and four other U.S. cities," Journal of Urban Economics, Elsevier, vol. 127(C).
    8. Miller, Keaton, 2020. "Sharing the sacrifice, minimizing the pain: Optimal wage reductions," Economics Letters, Elsevier, vol. 196(C).
    9. Famiglietti, Matthew & Leibovici, Fernando, 2022. "The impact of health and economic policies on the spread of COVID-19 and economic activity," European Economic Review, Elsevier, vol. 144(C).
    10. Okuguchi, Koji, 1993. "Unified approach to Cournot models : Oligopoly, taxation and aggregate provision of a pure public good," European Journal of Political Economy, Elsevier, vol. 9(2), pages 233-245, May.
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    Cited by:

    1. Céline Azémar & Rodolphe Desbordes & Paolo Melindi‐Ghidi & Jean‐Philippe Nicolaï, 2022. "Winners and losers of the COVID‐19 pandemic: An excess profits tax proposal," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 24(5), pages 1016-1038, October.

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    More about this item

    Keywords

    Labor supply; pandemic; aggregative games;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • J28 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Safety; Job Satisfaction; Related Public Policy
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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