The Vanishing Procyclicality of Labor Productivity
AbstractWe document three changes in postwar US macroeconomic dynamics: (i) the procyclicality of labor productivity vanished, (ii) the relative volatility of employment rose, and (iii) the relative (and absolute) volatility of the real wage rose. We propose an explanation for all three changes that is based on a common source: the decline in labor market turnover, which reduced hiring frictions. We develop a simple model with hiring frictions, variable effort, and endogenous wage rigidities to illustrate the mechanisms underlying our explanation. We show that the decline in turnover may also have contributed to the observed decline in output volatility.
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Bibliographic InfoPaper provided by Barcelona Graduate School of Economics in its series Working Papers with number 489.
Date of creation: Jan 2014
Date of revision:
labor hoarding; labor market turnover; hiring frictions; wage rigidities; effort choice;
Other versions of this item:
- Thijs van Rens & Jordi Gali, 2010. "The Vanishing Procyclicality of Labor Productivity," 2010 Meeting Papers, Society for Economic Dynamics 705, Society for Economic Dynamics.
- Jordi Galí & Thijs van Rens, 2008. "The vanishing procyclicality of labor productivity," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 1230, Department of Economics and Business, Universitat Pompeu Fabra, revised Jul 2010.
- Galí, Jordi & van Rens, Thijs, 2010. "The Vanishing Procyclicality of Labor Productivity," IZA Discussion Papers 5099, Institute for the Study of Labor (IZA).
- Jordi Galí & Thijs van Rens, 2010. "The Vanishing Procyclicality of Labor Productivity," Kiel Working Papers 1641, Kiel Institute for the World Economy.
- Galí, Jordi & van Rens, Thijs, 2014. "The Vanishing Procyclicality of Labor Productivity," CEPR Discussion Papers, C.E.P.R. Discussion Papers 9853, C.E.P.R. Discussion Papers.
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- The Vanishing Procyclicality of Labor Productivity
by Christian Zimmermann in NEP-DGE blog on 2010-08-11 02:57:17
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