Eliaz, Kfir; Spiegler, Rani - National Bureau of Economic Research (NBER) - 2013
We incorporate reference-dependent worker behavior into a search-matching model of the labor market, in which firms have all the bargaining power and productivity follows a log-linear AR(1) process. Motivated by Akerlof (1982) and Bewley (1999), we assume that existing workers' output falls...