Details

Autor(en) / Beteiligte

• Evans, David
• Evans, George W.
• McGough, Bruce

Titel

Bounded rationality and unemployment dynamics

Ist Teil von

• Economics letters, 2022-01, Vol.210, p.110150, Article 110150

Ort / Verlag

Amsterdam: Elsevier B.V

Erscheinungsjahr

2022

Quelle

Alma/SFX Local Collection

Beschreibungen/Notizen

• Using the bounded rationality implementation developed in Evans et al. (2021), we consider unemployment dynamics driven by aggregate productivity shocks within a McCall-type labor-search model. We find that bounded rationality magnifies the impact effect of a decline in productivity on unemployment. Boundedly rational agents are overly pessimistic about wage offers during the course of a recession, resulting in higher unemployment relative to the rational model. •We consider boundedly-rational agents in a job search model.•Agents update over time their perceived value of waiting for another job offer.•Reservation wages are adapted to recent experience.•Boundedly rational agents are overly pessimistic about wage offers in recessions.•Unemployment is higher in recessions than if agents were fully rational.