fact, we propose a business cycle model with employment adjustment costs, variable hours and labor effort. We show that, in … our model with variable effort, greater labor market frictions are associated with procyclical labor productivity as well … as stable employment. In contrast, the constant-effort model fails to replicate the observed cross-country pattern in the …

We introduce two types of effort into an otherwise standard labor search model to examine indeterminacy and sunspot … equilibria. Variable labor effort gives rise to increasing returns to hours in production. This makes workers more valuable and … contributes to self-fulfilling profit expectations, raising the likelihood of indeterminacy. Variable search effort makes workers …

three margins: employment, hours, and effort. We estimate the model with Bayesian methods and find evidence for a significant … use of the effort margin in generating procyclical productivity. We show that a model with labor effort is more successful …, we demonstrate that effort dampens the response of inflation to exogenous shocks. …