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Do Emotions Improve Labor Market Outcomes?

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  • Lorenz Goette
  • David Huffman

Abstract

Traditionally, models of economic decision-making assume that individuals are rational and emotionless. This chapter argues that the neglect of emotion in economic models explains their inability to predict important aspects of the labor market. We focus on one example: the scarcity of nominal wage cuts. [IZA Discussion Paper No. 1895]

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  • Lorenz Goette & David Huffman, 2010. "Do Emotions Improve Labor Market Outcomes?," Working Papers id:2743, eSocialSciences.
    • Handle: RePEc:ess:wpaper:id:2743
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    More about this item

    Keywords

    wage rigidity; affect; emotions; money illusion; loss aversion;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • B49 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Other

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