Asymmetric Reciprocity and the Cyclical Behaviour of Wages, Effort and Job Creation - Economics Seminar

Event Date: 22 February 2023

Speaker: Marco Fongoni, Assitant Professor, University of Marquise, AMSE

Time: 4-5:15pm

Location: Please contact Rachel Hill (r.hill@strath.ac.uk) for Zoom details

Abstract: "This paper develops a search and matching framework in which workers are characterised by asymmetric reference-dependent reciprocity, and firms set wages by considering the effect that wage changes can have on effort, and therefore on output. The cyclical response of workers' effort to wage changes can considerably amplify the magnitude of shocks, independently of the cyclicality of the hiring wage; and firms' expectations of downward wage rigidity in existing jobs increases the volatility of job creation. The model is consistent with evidence on hiring and incumbents' wage cyclicality, and provides novel predictions on the dynamics of employed workers' effort."

Published: 18 January 2023