Job Amenity Shocks and Labor Reallocation

Sadhika Bagga, Lukas Mann, Aysegul Sahin and Giovanni L. Violante

No 20195, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We develop an equilibrium model to study the dynamic adjustment of a frictional labor market to aggregate shifts in the demand and supply of a job amenity. When preferences for the amenity are heterogeneous in the population, and its availability is heterogeneous across jobs, labor reallocation ensues. The defining traits of such reallocation (a rise in vacancies and job-to-job transitions, a fall in matching efficiency and in relative wages of jobs supplying the amenity) closely resemble those observed in the post-pandemic U.S. labor market in the aftermath of the shift to remote work. A version of the model calibrated to the U.S. experience matches the data well with shocks of plausible magnitude. Cross-sectional and survey data from various sources offer support for this mechanism.

Keywords: Job Amenities; Reallocation (search for similar items in EconPapers)
JEL-codes: E10 J63 (search for similar items in EconPapers)
Date: 2025-05
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