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Aggregate Hours Worked in OECD Countries: New Measurement and Implications for Business Cycles

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  • Lee E. Ohanian
  • Andrea Raffo

Abstract

We build a new quarterly dataset of aggregate hours worked consistent with standard NIPA constructs for 14 OECD countries over the last fifty years. We find that cyclical features of labor markets across countries differ markedly from the accepted empirical facts reported in the literature based on either just U.S. hours data, or based on cross-country employment data. We document that total hours worked in many OECD countries are about as volatile as output, that a relatively large fraction of labor market adjustment takes place along the intensive margin outside the United States, and that the volatility of total hours relative to output volatility has increased over time in almost all countries. We use these data to re-assess productivity and labor wedges during the Great Recession and during prior recessions. We find that the Great Recession in many OECD countries is a significant puzzle in that labor wedges are quite small, while those in the U.S. Great Recession - and those in previous European recessions - are much larger. These new data indicate that understanding cyclical labor fluctuations in OECD countries requires understanding why hours fluctuate so much more than previously considered, how and why labor markets changed so much in the last few years, why cyclical adjustment of hours per worker in countries with large firing costs is not even larger than observed, and why the Great Recession differs so much across countries.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17420.

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Date of creation: Sep 2011
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Handle: RePEc:nbr:nberwo:17420

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Citations

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Cited by:
  1. Fabrizio Perri, 2012. "Comment on "Structural and Cyclical Forces in the Labor Market during the Great Recession: Cross-Country Evidence"," NBER Chapters, in: NBER International Seminar on Macroeconomics 2012, pages 405-414 National Bureau of Economic Research, Inc.
  2. Loukas Karabarbounis, 2014. "The Labor Wedge: MRS vs. MPN," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(2), pages 206-223, April.
  3. Fève, Patrick & Sahuc, Jean-Guillaume, 2013. "On the Size of the Government Spending Multiplier in the Euro Area," IDEI Working Papers 776, Institut d'Économie Industrielle (IDEI), Toulouse, revised Nov 2013.
  4. Pedro Miguel Soares Brinca, 2013. "Distortions in the Neoclassical Growth Model: A Cross Country Analysis," 2013 Papers pbr150, Job Market Papers.
  5. Ellen R. McGrattan & Edward C. Prescott, 2012. "The labor productivity puzzle," Working Papers 694, Federal Reserve Bank of Minneapolis.
    • Ellen R. McGrattan & Edward C. Prescott, 2012. "The Labor Productivity Puzzle," Book Chapters, in: Lee E. Ohanian & John B. Taylor & Ian J. Wright (ed.), Government Policies and the Delayed Economic Recovery, chapter 6 Hoover Institution, Stanford University.
  6. Pedro S. Amaral & Murat Tasci, 2014. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies Across OECD Countries," Koç University-TUSIAD Economic Research Forum Working Papers 1405, Koc University-TUSIAD Economic Research Forum.
  7. Gilhooly, Robert & Weale, Martin & Wieladek, Tomasz, 2012. "Disaggregating the international business cycle," Discussion Papers 37, Monetary Policy Committee Unit, Bank of England.
  8. Jean-François Rouillard, 2013. "International Risk Sharing and Land Dynamics," Cahiers de recherche 13-02, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke.
  9. Schreiber, Sven, 2013. "(When) does money growth help to predict Euro-area inflation at low frequencies?," Discussion Papers 2013/10, Free University Berlin, School of Business & Economics.
  10. Temel Taskin, 2013. "Intensive Margin and Extensive Margin Adjustments of Labor Market : Turkey versus United States," Working Papers 1339, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  11. Loukas Karabarbounis, 2012. "Home Production, Labor Wedges, and International Real Business Cycles," NBER Working Papers 18366, National Bureau of Economic Research, Inc.
  12. Gehrke, Britta & Yao, Fang, 2013. "Sources of Real Exchange Rate Fluctuations: The Role of Supply Shocks Revisited," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79821, Verein für Socialpolitik / German Economic Association.
  13. Alonso-Ortiz, Jorge, 2013. "Taxes, Transfers and the Macroeconomy," MPRA Paper 49569, University Library of Munich, Germany.
  14. Jordan Roulleau-Pasdeloup, 2013. "The Productive Government Spending Multiplier, In and Out of The Zero Lower Bound," Working Papers 2013-02, Centre de Recherche en Economie et Statistique.

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