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Distributing scarce jobs and output: experimental evidence on the dynamic effects of rationing

Published online by Cambridge University Press:  14 March 2025

Guidon Fenig  and
Luba Petersen
Guidon Fenig*
Affiliation:
Department of Economics, University of Saskatchewan, 9 Campus Drive, Saskatoon, SK S7N 5A5, Canada
Luba Petersen*
Affiliation:
Simon Fraser University, 8888 University Drive, Burnaby, BC V5A 1S6, Canada
*
[email protected]
[email protected]
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Abstract

How does the allocation of scarce jobs and production influence their supply? We present the results of a macroeconomics laboratory experiment that investigates the effects of alternative rationing schemes on economic stability. Participants play the role of worker-consumers who interact in labor and output markets. All output, which yields a reward to participants, must be produced through costly labor. Automated firms hire workers to produce output so long as there is sufficient demand for all production. In every period either output or labor hours are rationed. Random queue, equitable, and priority (i.e., property rights) rationing schemes are compared. Production volatility is the lowest under a priority rationing rule and is significantly higher under a scheme that allocates the scarce resource through a random queue. Production converges toward the steady state under a priority rule, but can diverge to significantly lower levels under a random queue or equitable rule where there is the opportunity for and perception of free-riding. At the individual level, rationing in the output market leads consumer-workers to supply less labor in subsequent periods. A model of myopic decision-making is developed to rationalize the results.

Keywords

RationingAllocation rulesUnemploymentExperimental macroeconomicsLaboratory experimentGeneral equilibrium

JEL classification

E62: Fiscal Policy E13: Neoclassical H31: Household H4: Publicly Provided Goods C92: Laboratory, Group Behavior
Type
Original Paper
Information
Experimental Economics , Volume 20 , Issue 3 , September 2017 , pp. 707 - 735
Copyright
Copyright © 2017 Economic Science Association

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Footnotes

Electronic supplementry material The online version of this article (doi:https://doi.org/10.1007/s10683-016-9507-y) contains supplementary material, which is available to authorized users.

We have benefited from the insightful comments of Katherine Anderson, David Freeman, Catherine Eckel, George Evans, Chloe Gibbs, Brit Grosskopf, Erik Kimbrough, Corrine Low, Charles Noussair, Rosemary Prentice, Alexandra van Geen, two anonymous referees as well as seminar and conference participants at University of British Columbia, University of Saskatchewan, the 2014 Canadian Economic Association Meetings, the 2015 Barcelona GSE Summer Forum in Theoretical and Experimental Macroeconomics, and the 2016 North American Economic Science Association. We also appreciate the insightful comments from two anonymous referees. Finally, we would like to thank the Sury Initiative for Global Finance and International Risk Management and the Social Sciences and Humanities Research Council of Canada for generous financial support and Camila Cordoba and Matthew Pentecost for excellent research assistance.

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