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

Carl Campbell ()

Economic Modelling, 2014, vol. 42, issue C, 313-322

Abstract: This study develops models in which workers form expectations of average wages in choosing levels of effort and on-the-job search. It is assumed that information on lagged average wages is available at a low fixed cost, whilst acquiring other information requires an additional variable cost. Under reasonable conditions, workers' expectations are at least partly adaptive, and may be a mixture of rational and adaptive expectations. Microeconomic parameters determine the degree to which expectations are adaptive and the weights placed on various lags of wages. As a result of partly adaptive expectations, nominal demand shocks may have real effects.

Keywords: Wage expectations; Imperfect information (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (1)

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Working Paper: The formation of wage expectations in the effort and quit decisions of workers (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:42:y:2014:i:c:p:313-322

DOI: 10.1016/j.econmod.2014.07.002

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