The Vanishing Procyclicality of Labor Productivity
AbstractWe document three changes in postwar US macroeconomic dynamics: (i) the procyclicality of labor productivity has vanished, (ii) the relative volatility of employment has risen, and (iii) the relative (and absolute) volatility of the real wage has risen. We propose an explanation for all three changes that is based on a common source: a decline in labor market frictions. We develop a simple model with labor market frictions, variable effort, and endogenous wage rigidities to illustrate the mechanisms underlying our explanation. We show that the reduction in frictions may also have contributed to the observed decline in output volatility.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5099.
Length: 42 pages
Date of creation: Jul 2010
Date of revision:
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Other versions of this item:
- Jordi Galí & Thijs van Rens, 2008. "The vanishing procyclicality of labor productivity," Economics Working Papers 1230, Department of Economics and Business, Universitat Pompeu Fabra, revised Jul 2010.
- Jordi Galí & Thijs van Rens, 2010. "The Vanishing Procyclicality of Labor Productivity," Working Papers 489, Barcelona Graduate School of Economics.
- Jordi Galí & Thijs van Rens, 2010. "The Vanishing Procyclicality of Labor Productivity," Kiel Working Papers 1641, Kiel Institute for the World Economy.
- Thijs van Rens & Jordi Gali, 2010. "The Vanishing Procyclicality of Labor Productivity," 2010 Meeting Papers 705, Society for Economic Dynamics.
- E24 - Macroeconomics and Monetary Economics - - Macroeconomics: 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-08-06 (All new papers)
- NEP-BEC-2010-08-06 (Business Economics)
- NEP-CBA-2010-08-06 (Central Banking)
- NEP-DGE-2010-08-06 (Dynamic General Equilibrium)
- NEP-LAB-2010-08-06 (Labour Economics)
- NEP-MAC-2010-08-06 (Macroeconomics)
- NEP-MIC-2010-08-06 (Microeconomics)
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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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