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 search frictions, variable effort, and endogenous wage rigidities to illustrate the mechanisms underlying our explanation. We show that the reduction in search frictions may also have contributed to the observed decline in output volatility.
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Bibliographic InfoPaper provided by Society for Economic Dynamics in its series 2010 Meeting Papers with number 705.
Date of creation: 2010
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Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
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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.
- 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," 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.
- 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
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- The Vanishing Procyclicality of Labor Productivity
by Christian Zimmermann in NEP-DGE blog on 2010-08-11 02:57:17
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