Discussion paper

DP8997 Reference Dependence and Labor-Market Fluctuations

We incorporate reference-dependent preferences into a search-and-matching model of the labor market, in which firms have all the bargaining power and productivity follows an AR(1) process. Motivated by Akerlof (1982) and Bewley (1999), we assume that existing workers are willing to exert unobserved,


Spiegler, R and K Eliaz (2012), ‘DP8997 Reference Dependence and Labor-Market Fluctuations‘, CEPR Discussion Paper No. 8997. CEPR Press, Paris & London. https://cepr.org/publications/dp8997