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Accounting for Labor Productivity Puzzle

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  • Kateryna Bornukova

    ()

Abstract

In the recent decades aggregate labor productivity in the U.S. became countercyclical (labor productivity puzzle). At the same time the U.S. experienced dramatic changes in the structure of households due to increased female labor force participation. I show that changes in the household structure and corresponding changes in labor supply behavior can explain the labor productivity puzzle. I build a model with heterogeneous one- and two-earner households and aggregate technology shocks and calibrate it to the current U.S. data. I impose the household structure change in the model and show that the behavior of labor productivity changes from procyclical to countercyclical, as in the U.S. I also show that individual labor supply volatility depends on the role of the earner in the household. Increase in the proportion of multiple-earner households leads to increase in aggregate labor supply volatility.

Suggested Citation

  • Kateryna Bornukova, 2015. "Accounting for Labor Productivity Puzzle," BEROC Working Paper Series 26, Belarusian Economic Research and Outreach Center (BEROC).
  • Handle: RePEc:bel:wpaper:26
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    More about this item

    Keywords

    business cycles; family labor supply; multiple-earner households;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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