Going the Extra Mile: Effort by Workers and Job-Seekers

Matthias S. Hertweck (), Vivien Lewis and Stefania Villa
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Matthias S. Hertweck: Deutsche Bundesbank

No 1277, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: We introduce two types of effort into an otherwise standard labor search model to examine equilibrium determinacy. Indeterminacy occurs when wages rise sharply in response to a labor market tightening. Variable labor effort gives rise to short-run increasing returns to hours in production. This raises workers’ marginal product and wages, expanding the region of indeterminacy. Variable search effort makes workers search more intensively in a tighter labor market, which limits the rise in wages and shrinks the region of indeterminacy. Indeterminacy disappears completely when vacancy posting costs are replaced with hiring costs.

Keywords: Determinacy; Effort; Hours; Labor; Search intensity (search for similar items in EconPapers)
JEL-codes: E23 E24 E32 E64 E71 (search for similar items in EconPapers)
Date: 2020-06
New Economics Papers: this item is included in nep-dge and nep-mac
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Related works:
Journal Article: Going the Extra Mile: Effort by Workers and Job‐Seekers (2021)
Working Paper: Going the extra mile: Effort by workers and job-seekers (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_1277_20

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