RDLMF

Reference Dependence and Labor-Market Fluctuations

Coordinatore	TEL AVIV UNIVERSITY    more  Organization address address: RAMAT AVIV city: TEL AVIV postcode: 69978 contact info Titolo: Ms. Nome: Lea Cognome: Pais Email: send email Telefono: 97236408774 Fax: 9723640997
Nazionalità Coordinatore	Israel [IL]
Totale costo	100˙000 €
EC contributo	100˙000 €
Programma	FP7-PEOPLE Specific programme "People" implementing the Seventh Framework Programme of the European Community for research, technological development and demonstration activities (2007 to 2013)
Code Call	FP7-PEOPLE-2012-CIG
Funding Scheme	MC-CIG
Anno di inizio	2013
Periodo (anno-mese-giorno)	2013-01-01   -   2016-12-31

 Partecipanti

#	participant	country	role	EC contrib. [€]
1	TEL AVIV UNIVERSITY  Organization address address: RAMAT AVIV city: TEL AVIV postcode: 69978 contact info Titolo: Ms. Nome: Lea Cognome: Pais Email: send email Telefono: 97236408774 Fax: 9723640997	IL (TEL AVIV)	coordinator	100˙000.00

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 Obiettivo del progetto (Objective)

'The proposed project is concerned with Reference Dependence and Labor-Market Fluctuations (RDLMF). It aims to incorporate a fairness-based account of the labor relation into a search-and-matching (S&M) model of the labor market in which workers' 'productivity' fluctuates across time periods. Our analysis will explore the theoretical implications for equilibrium wage and unemployment fluctuations. We propose a framework, which as in Akerlof (1982), workers' morale (and therefore their willingness to exert discretionary, unobserved effort) is damaged when their wage falls below a reference point. Following the recent literature on reference-dependent preferences that originated with KÅ‘szegi and Rabin (2006), we assume that the workers' reference point is a function of their lagged expectations of their labor-market outcome (specifically, their lagged-expected wage earnings). We hypothesize that the equilibrium predictions of the model are that existing workers' wages display downward rigidity with respect to macroeconomic shocks, while entry-level wages are lower and more flexible. Our model does not introduce new behavioral parameters; We hypothesize that for any given specification of the market primitives, it gives rise to higher volatility of market tightness than in the absence of reference dependence. We believe that the model is capable of producing additional insights into the way the labor market responds to macroeconomic fluctuations, insights which are difficult to address with existing models.'