The Labor Market with People in It: Personality Traits and Employment Dynamics.

Abstract

Issues pertaining to the organization and efficiency of the labor market and to the dynamics of employment and unemployment have always been at the forefront of the concerns of economists. Typically, such issues are approached through the analysis of the conflicting interests of a representative worker and of a representative firm, each of which intending to maximize the corresponding intertemporal objective function. Much of the research undertaken on this subject neglects the fact that each person is unique and endowed with different personality traits that influence their educational attainment, their ability to access jobs, their productivity while employed, and also their willingness to support, through social welfare mechanisms, those who become unemployed. In this research, we propose a simulation model to approach the dynamics of the labor market. The model conceives an economy populated by a large number of individuals who, over their life cycles, acquire education, search for a job, receive a wage while employed, and access an unemployment benefit while out of work. Because individuals are endowed with different personalities, they experience different degrees of professional success over their life cycles. Such reasoning leads to a labor market aggregate outcome characterized by emergent phenomena, out-of-equilibrium, path dependence, and other features that are characteristic of a complex evolving system. In the proposed setting, the personality of individuals is shaped by taking into account the big five personality traits of psychological analysis, namely openness to experience, conscientiousness, extraversion, agreeableness, and neuroticism.