IDEAS home Printed from https://ideas.repec.org/a/red/issued/18-263.html
   My bibliography  Save this article

Hours and Employment Over the Business Cycle: A Structural Analysis

Author

Listed:
  • Matteo Cacciatore

    (HEC Montreal)

  • Giuseppe Fiori

    (North Carolina State University)

  • Nora Traum

    (HEC Montreal)

Abstract

We conduct Bayesian inference on a quantitative business-cycle model with search-and-matching frictions and a neoclassical hours-supply decision. Likelihood maximization with both U.S. macroeconomic and labor data shows the model cannot cannot jointly reproduce the comovement of the labor margins with themselves and with macro data. A parsimonious set of features reconciles the model with the data: non-separable preferences with parametrized wealth effects and costly hours adjustment. The model offers a structural explanation for the observed time-varying comovement between the labor margins, being either positive or negative, across post-war U.S. recessions and recoveries. Moreover, the estimated model shows adjustment in the intensive margin contributes up to half the dynamics of total hours in these episodes, as intensive-margin adjustments increase employment losses during recessions and delay employment recoveries. (Copyright: Elsevier)

Suggested Citation

  • Matteo Cacciatore & Giuseppe Fiori & Nora Traum, 2020. "Hours and Employment Over the Business Cycle: A Structural Analysis," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 35, pages 240-262, January.
  • Handle: RePEc:red:issued:18-263
    DOI: 10.1016/j.red.2019.07.001
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1016/j.red.2019.07.001
    Download Restriction: Access to full texts is restricted to ScienceDirect subscribers and institutional members. See http://www.sciencedirect.com/ for details.

    File URL: https://libkey.io/10.1016/j.red.2019.07.001?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Dustmann, Christian & Glitz, Albrecht & Vogel, Thorsten, 2010. "Employment, wages, and the economic cycle: Differences between immigrants and natives," European Economic Review, Elsevier, vol. 54(1), pages 1-17, January.
    2. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, December.
    3. Haefke, Christian & Sonntag, Marcus & van Rens, Thijs, 2013. "Wage rigidity and job creation," Journal of Monetary Economics, Elsevier, vol. 60(8), pages 887-899.
    4. L. Rachel Ngai & Christopher A. Pissarides, 2007. "Structural Change in a Multisector Model of Growth," American Economic Review, American Economic Association, vol. 97(1), pages 429-443, March.
    5. Alejandro Justiniano & Giorgio E. Primiceri & Andrea Tambalotti, 2013. "Is There a Trade-Off between Inflation and Output Stabilization?," American Economic Journal: Macroeconomics, American Economic Association, vol. 5(2), pages 1-31, April.
    6. Amelie Constant & Klaus Zimmermann, 2006. "The Making of Entrepreneurs in Germany: Are Native Men and Immigrants Alike?," Small Business Economics, Springer, vol. 26(3), pages 279-300, April.
    7. Christian Dustmann & Francesco Fasani & Tommaso Frattini & Luigi Minale & Uta Schönberg, 2017. "On the economics and politics of refugee migration," Economic Policy, CEPR;CES;MSH, vol. 32(91), pages 497-550.
    8. Pierre Cahuc & Fabien Postel-Vinay & Jean-Marc Robin, 2006. "Wage Bargaining with On-the-Job Search: Theory and Evidence," Econometrica, Econometric Society, vol. 74(2), pages 323-364, March.
    9. Gianmarco I. P. Ottaviano & Giovanni Peri, 2021. "Rethinking The Effect Of Immigration On Wages," World Scientific Book Chapters, in: Firms and Workers in a Globalized World Larger Markets, Tougher Competition, chapter 9, pages 245-290, World Scientific Publishing Co. Pte. Ltd..
    10. Acemoglu, Daron & Shimer, Robert, 1999. "Holdups and Efficiency with Search Frictions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 827-849, November.
    11. Enrico Moretti, 2010. "Local Multipliers," American Economic Review, American Economic Association, vol. 100(2), pages 373-377, May.
    12. Acemoglu, Daron, 2001. "Good Jobs versus Bad Jobs," Journal of Labor Economics, University of Chicago Press, vol. 19(1), pages 1-21, January.
    13. Kaas Leo & Manger Christian, 2012. "Ethnic Discrimination in Germany’s Labour Market: A Field Experiment," German Economic Review, De Gruyter, vol. 13(1), pages 1-20, February.
    14. Michele Battisti & Gabriel Felbermayr & Giovanni Peri & Panu Poutvaara, 2018. "Immigration, Search and Redistribution: A Quantitative Assessment of Native Welfare," Journal of the European Economic Association, European Economic Association, vol. 16(4), pages 1137-1188.
    15. Christian Dustmann & Tommaso Frattini, 2014. "The Fiscal Effects of Immigration to the UK," Economic Journal, Royal Economic Society, vol. 124(580), pages 593-643, November.
    16. Frank Smets & Rafael Wouters, 2007. "Shocks and Frictions in US Business Cycles: A Bayesian DSGE Approach," American Economic Review, American Economic Association, vol. 97(3), pages 586-606, June.
    17. Martina Rebien & Michael Stops & Anna Zaharieva, 2020. "Formal Search And Referrals From A Firm'S Perspective," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 61(4), pages 1679-1748, November.
    18. Moreno-Galbis, Eva & Tritah, Ahmed, 2016. "The effects of immigration in frictional labor markets: Theory and empirical evidence from EU countries," European Economic Review, Elsevier, vol. 84(C), pages 76-98.
    19. Zainab Iftikhar & Anna Zaharieva, 2019. "General equilibrium effects of immigration in Germany: Search and matching approach," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 31, pages 245-276, January.
    20. Francesco D’Amuri & Gianmarco I.P. Ottaviano & Giovanni Peri, 2021. "The labor market impact of immigration in Western Germany in the 1990s," World Scientific Book Chapters, in: Firms and Workers in a Globalized World Larger Markets, Tougher Competition, chapter 8, pages 223-243, World Scientific Publishing Co. Pte. Ltd..
    21. Marco Manacorda & Alan Manning & Jonathan Wadsworth, 2012. "The Impact Of Immigration On The Structure Of Wages: Theory And Evidence From Britain," Journal of the European Economic Association, European Economic Association, vol. 10(1), pages 120-151, February.
    22. Nanos, Panagiotis & Schluter, Christian, 2014. "The composition of wage differentials between migrants and natives," European Economic Review, Elsevier, vol. 65(C), pages 23-44.
    23. Michael Ben-Gad, 2008. "Capital-Skill Complementarity and the Immigration Surplus," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(2), pages 335-365, April.
    24. Andri Chassamboulli & Theodore Palivos, 2014. "A Search‐Equilibrium Approach To The Effects Of Immigration On Labor Market Outcomes," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55(1), pages 111-129, February.
    25. Schmidt, Christoph M. & Stilz, Anette & Zimmermann, Klaus F., 1994. "Mass migration, unions, and government intervention," Journal of Public Economics, Elsevier, vol. 55(2), pages 185-201, October.
    26. Zerrin Salikutluk & Johannes Giesecke & Martin Kroh, 2016. "Geflüchtete nahmen in Deutschland später eine Erwerbstätigkeit auf als andere MigrantInnen," DIW Wochenbericht, DIW Berlin, German Institute for Economic Research, vol. 83(35), pages 749-756.
    27. Christopher J. Flinn, 2006. "Minimum Wage Effects on Labor Market Outcomes under Search, Matching, and Endogenous Contact Rates," Econometrica, Econometric Society, vol. 74(4), pages 1013-1062, July.
    28. Borjas, George J., 1999. "The economic analysis of immigration," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 28, pages 1697-1760, Elsevier.
    29. Gautier, Pieter A, 2002. "Unemployment and Search Externalities in a Model with Heterogeneous Jobs and Workers," Economica, London School of Economics and Political Science, vol. 69(273), pages 21-40, February.
    30. George J. Borjas, 2003. "The Labor Demand Curve is Downward Sloping: Reexamining the Impact of Immigration on the Labor Market," The Quarterly Journal of Economics, Oxford University Press, vol. 118(4), pages 1335-1374.
    31. Gabriel Felbermayr & Wido Geis & Wilhelm Kohler, 2014. "Restrictive Immigration Policy in Germany: Pains and Gains Foregone?," World Scientific Book Chapters, in: European Economic Integration, WTO Membership, Immigration and Offshoring, chapter 12, pages 395-419, World Scientific Publishing Co. Pte. Ltd..
    32. Andri Chassamboulli & Theodore Palivos, 2014. "A Search‐Equilibrium Approach To The Effects Of Immigration On Labor Market Outcomes," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55, pages 111-129, February.
    33. Ben-Gad, Michael, 2004. "The economic effects of immigration--a dynamic analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 28(9), pages 1825-1845, July.
    34. Christian Dustmann & Tommaso Frattini & Ian P. Preston, 2013. "The Effect of Immigration along the Distribution of Wages," Review of Economic Studies, Oxford University Press, vol. 80(1), pages 145-173.
    35. Constant, Amelie F. & Rinne, Ulf, 2013. "Labour Market Information for Migrants and Employers: The Case of Germany," IZA Research Reports 50, Institute of Labor Economics (IZA).
    36. Christian Dustmann & Ian Preston, 2012. "Comment: Estimating The Effect Of Immigration On Wages," Journal of the European Economic Association, European Economic Association, vol. 10(1), pages 216-223, February.
    37. Ortega, Javier, 2000. "Pareto-Improving Immigration in an Economy with Equilibrium Unemployment," Economic Journal, Royal Economic Society, vol. 110(460), pages 92-112, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Nchofoung, Tii N., 2022. "Trade shocks and labour market resilience in Sub-Saharan Africa: Does the franc zone response differently?," International Economics, Elsevier, vol. 169(C), pages 161-174.
    2. Gantert, Konstantin, 2022. "The impact of active aggregate demand on utilisation-adjusted TFP," IWH Discussion Papers 9/2022, Halle Institute for Economic Research (IWH).
    3. Noritaka Kudoh & Hiroaki Miyamoto, 2021. "General Equilibrium Effects and Labor Market Fluctuations," Working Papers SDES-2021-4, Kochi University of Technology, School of Economics and Management, revised May 2021.
    4. Michele Battisti & Ryan Michaels & Choonsung Park, 2016. "Labor supply within the firm," ifo Working Paper Series 222, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    5. Horvath, Jaroslav & Yang, Guanyi, 2022. "Unemployment dynamics and informality in small open economies," European Economic Review, Elsevier, vol. 141(C).
    6. Lewis, Vivien & Villa, Stefania & Wolters, Maik H., 2019. "Labor productivity, effort and the euro area business cycle," Discussion Papers 44/2019, Deutsche Bundesbank.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Zainab Iftikhar & Anna Zaharieva, 2019. "General equilibrium effects of immigration in Germany: Search and matching approach," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 31, pages 245-276, January.
    2. Busch, Christopher & Krueger, Dirk & Ludwig, Alexander & Popova, Irina & Iftikhar, Zainab, 2020. "Should Germany have built a new wall? Macroeconomic lessons from the 2015-18 refugee wave," Journal of Monetary Economics, Elsevier, vol. 113(C), pages 28-55.
    3. Fiaschi, Davide & Tealdi, Cristina, 2020. "Winners and Losers of Immigration," IZA Discussion Papers 13600, Institute of Labor Economics (IZA).
    4. Xiangbo Liu & Theodore Palivos & Xiaomeng Zhang, 2017. "Immigration, Skill Heterogeneity, And Qualification Mismatch," Economic Inquiry, Western Economic Association International, vol. 55(3), pages 1231-1264, July.
    5. Hammer, Luisa & Hertweck, Matthias S., 2022. "EU enlargement and (temporary) migration: Effects on labour market outcomes in Germany," Discussion Papers 02/2022, Deutsche Bundesbank.
    6. Ikhenaode, Bright Isaac, 2018. "Immigration, Skill Acquisition and Fiscal Redistribution in a Search-Equilibrium Model," MPRA Paper 89897, University Library of Munich, Germany.
    7. Chassamboulli, Andri & Palivos, Theodore, 2013. "The impact of immigration on the employment and wages of native workers," Journal of Macroeconomics, Elsevier, vol. 38(PA), pages 19-34.
    8. Sara de la Rica & Albretch Glitz & Francesc Ortega, 2013. "Immigration in Europe: Trends, Policies and Empirical Evidence," Working Papers 2013-16, FEDEA.
    9. Docquier, Frédéric & Iftikhar, Zainab, 2019. "Brain drain, informality and inequality: A search-and-matching model for sub-Saharan Africa," Journal of International Economics, Elsevier, vol. 120(C), pages 109-125.
    10. Braun, Sebastian Till & Weber, Henning, 2021. "How do regional labor markets adjust to immigration? A dynamic analysis for post-war Germany," Journal of International Economics, Elsevier, vol. 129(C).
    11. Jens Ruhose, 2015. "Microeconometric Analyses on Economic Consequences of Selective Migration," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 61, March.
    12. Chletsos Michael & Roupakias Stelios, 2019. "Do Immigrants Compete with Natives in the Greek Labour Market? Evidence from the Skill-Cell Approach before and during the Great Recession," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 19(2), pages 1-30, April.
    13. Andri Chassamboulli & Theodore Palivos, 2014. "A Search‐Equilibrium Approach To The Effects Of Immigration On Labor Market Outcomes," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55(1), pages 111-129, February.
    14. Edo, Anthony & Rapoport, Hillel, 2019. "Minimum wages and the labor market effects of immigration," Labour Economics, Elsevier, vol. 61(C).
    15. Moreno-Galbis, Eva & Tritah, Ahmed, 2016. "The effects of immigration in frictional labor markets: Theory and empirical evidence from EU countries," European Economic Review, Elsevier, vol. 84(C), pages 76-98.
    16. Michele Battisti & Gabriel Felbermayr & Giovanni Peri & Panu Poutvaara, 2018. "Immigration, Search and Redistribution: A Quantitative Assessment of Native Welfare," Journal of the European Economic Association, European Economic Association, vol. 16(4), pages 1137-1188.
    17. Cords, Dario, 2017. "Endogenous technology, matching, and labor unions: Does low-skilled immigration affect the technological alignment of the host country?," Hohenheim Discussion Papers in Business, Economics and Social Sciences 20-2017, University of Hohenheim, Faculty of Business, Economics and Social Sciences.
    18. Lewis, Ethan & Peri, Giovanni, 2015. "Immigration and the Economy of Cities and Regions," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 625-685, Elsevier.
    19. Andri Chassambouli & Giovanni Peri, 2015. "The Labor Market Effects of Reducing the Number of Illegal Immigrants," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(4), pages 792-821, October.
    20. Åslund, Olof & Engdahl, Mattias, 2013. "Open borders, transport links and local labor markets," Working Paper Series 2013:9, Uppsala University, Department of Economics.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:red:issued:18-263. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/sedddea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christian Zimmermann (email available below). General contact details of provider: https://edirc.repec.org/data/sedddea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.