Worker Identity, Employment Fluctuations and Stabilization Policy

Dennis J. Snower () and Wolfgang Lechthaler
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Dennis J. Snower: Hertie School of Governance

No 7413, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper provides a model of "social hysteresis" whereby long, deep recessions demotivate workers and thereby lead them to change their work ethic. In switching from a pro-work to an anti-work identity, their incentives to seek and retain work fall and consequently their employment chances fall. In this way, temporary recessions may come to have permanent effects on aggregate employment. We also show that these permanent effects, along with the underlying identity switches, can be avoided through stabilization policy. The size of the government expenditure multiplier can be shown to depend on the composition of identities in the workforce.

Keywords: economics of identity; work ethic; hysteresis; business cycle policy (search for similar items in EconPapers)
JEL-codes: E24 E60 J21 J28 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2013-05
New Economics Papers: this item is included in nep-hrm, nep-lab and nep-mac
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Related works:
Working Paper: Worker Identity, Employment Fluctuations and Stabilization Policy (2013)
Working Paper: Worker Identity, Employment Fluctuations and Stabilization Policy (2013)
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