How do inflation expectations affect the job search behavior of workers when wages are set in nominal terms? A canonical job search model incorporating nominal wage rigidities implies that on-the-job search should increase and reservation wages should decrease with expected inflation. Higher inflation expectations therefore lead to more frequent job-to-job transitions. We show in a novel survey that workers search more under higher values of hypothetical inflation. In the Survey of Consumer Expectations, workers with higher inflation expectations have lower reservation wages and are more likely to search and to change jobs. The relationship between expected inflation and employer-to-employer transitions also appears in aggregate time series data.
Authors
- Acknowledgements & Disclosure
- We the authors, Laura Pilossoph and Jane Ryngaert, declare that we have no relevant material or financial interests that relate to the research described in this paper. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
- DOI
- https://doi.org/10.3386/w33042
- Pages
- 32
- Published in
- United States of America
Table of Contents
- Introduction 3
- Model 7
- Expectations 8
- Perceived Values of Employment and Non-employment 8
- Search, Reservation Wages, and Job-to-Job Transitions 9
- Evidence from the Real-Time Population Survey 11
- Earnings Growth with Current Employer 12
- On-the-Job Search 13
- Evidence from the Survey of Consumer Expectations 15
- Data Description 15
- Inflation Expectations and On-the-Job Search 18
- Inflation Expectations and Reservation Wages 20
- Job-to-Job Transitions 21
- Time Series Evidence 23
- Conclusion 24
- Proofs 28
- Wage Indexation 29
- Additional Tables and Figures 30
