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The cyclicality of the user cost of labor

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  • Kudlyak, Marianna

Abstract

The user cost of labor is the expected difference between the present discounted value of wages paid to a worker hired in the current period and that paid to a worker hired in the next period. Analogous to the price of any long-term asset, the user cost, not wage, is the relevant price for a firm that is considering adding a worker. I construct its counterpart in the data and estimate that it is substantially more procyclical than average wages or wages of newly hired workers. I demonstrate an application of the finding using the textbook search and matching model.

Suggested Citation

  • Kudlyak, Marianna, 2014. "The cyclicality of the user cost of labor," Journal of Monetary Economics, Elsevier, vol. 68(C), pages 53-67.
    • Handle: RePEc:eee:moneco:v:68:y:2014:i:c:p:53-67
    DOI: 10.1016/j.jmoneco.2014.07.007
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