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Business Cycle, Great Recession and Part-time Jobs

Author

Listed:
  • Hyunju Kang

    (Korea Capital Market Institute)

  • Jaevin Park

    (University of Mississippi)

  • Hyunduk Suh

    (Inha University)

Abstract

During the Great Recession, the U.S. economy witnessed a substantial rise in part-time employment for sustained periods. We extend the New Keynesian-unemployment model by Gali et al. (2012) to allow substitution between full-time and part-time labor and estimate the model's parameters using the Bayesian method. In our model, households and firms can optimally allocate full-time and part-time labor. Moreover, disturbances exist in part-time labor supply (household disutility in part-time labor) and part-time labor demand (firms' efficiency to utilize part-time labor). Although several shocks were found to cause the transition to part-time jobs during the recession, the most important factor was the part-time labor supply shock that increases part-time participation. The transition from full-time to part-time jobs, caused by part-time labor market shocks, mitigated the contraction in output during the recession. Part-time labor supply shock also explains a significant portion of slow recovery in gross wage during the recession, as the shock lowers part-time wage as well as the proportion of full-time workers in total employment.

Suggested Citation

  • Hyunju Kang & Jaevin Park & Hyunduk Suh, 2018. "Business Cycle, Great Recession and Part-time Jobs," Inha University IBER Working Paper Series 2018-1, Inha University, Institute of Business and Economic Research, revised 21 Feb 2018.
  • Handle: RePEc:inh:wpaper:2018-1
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    More about this item

    Keywords

    Part-time labor; Great Recession; Unemployment; New Keynesian model;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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