TY  - GEN
AB  - This paper develops a search and matching model with heterogeneous firms, on-the-job
search by workers, Nash bargaining over wages and adaptive learning. We assume that
workers are boundedly rational in the sense that they do not have perfect foresight about the
outcome of wage bargaining. Instead workers use a recursive OLS learning mechanism and
base their forecasts on the linear wage regression with the firm's productivity and worker's
current wage as regressors. For a restricted set of parameters we show analytically that the
Nash bargaining solution in this setting is unique. We embed this solution into the agentbased
simulation and provide a numerical characterization of the Restricted Perceptions
Equilibrium. The simulation allows us to collect data on productivities and wages which is
used for updating workers' expectations. The estimated regression coefficient on productivity
is always higher than the bargaining power of workers, but the difference between the two
is decreasing as the bargaining power becomes larger and vanishes when workers are paid
their full productivity. In the equilibrium a higher bargaining power is associated with
higher wages and larger wage dispersion, in addition, the earnings distribution becomes
more skewed. Moreover, our results indicate that a higher bargaining power is associated
with a lower overall frequency of job-to-job transitions and a lower fraction of inefficient
transitions among them. Our results are robust to the shifts of the productivity distribution
DA  - 2018
KW  - On-the-job search
KW  - Nash bargaining
KW  - OLS learning
KW  - inefficient transitions
LA  - eng
PY  - 2018
SN  - 0931-6558
TI  - Expectation Formation and Learning in the Labour Market with On-the-Job Search and Nash Bargaining
UR  - https://nbn-resolving.org/urn:nbn:de:0070-pub-29327266
Y2  - 2024-11-22T03:26:18
ER  -