On-the-Job Search and Inflation Under the Microscope

Saman Darougheh (), Renato Faccini, Leonardo Melosi and Alessandro Villa
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Alessandro Villa: https://www.chicagofed.org/people/v/villa-alessandro

No WP 2025-10, Working Paper Series from Federal Reserve Bank of Chicago

Abstract: We develop a model where heterogeneous agents choose whether to engage in on-the-job search (OJS) to improve labor income. The model accounts for untargeted microdata patterns: fiscal incentives affect job-to-job mobility and wage growth of stayers—but not leavers—across the income distribution, pointing to OJS as a key driver of labor costs. Calibrated to micro and macro moments, the model shows that OJS cost shocks significantly affect real activity and inflation. The permanent decline in OJS costs—driven by ICT and AI-based tools—offers a novel explanation for the weakening of the unemployment-inflation relationship documented in empirical studies.

Keywords: Job ladder; Inflation; Wages; Tax incentives (search for similar items in EconPapers)
JEL-codes: E12 E31 J64 (search for similar items in EconPapers)
Pages: 63
Date: 2025-06-23
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https://doi.org/10.21033/wp-2025-10

Related works:
Working Paper: On-the-Job Search and Inflation under the Microscope (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedhwp:101279

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DOI: 10.21033/wp-2025-10

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