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Productivity News, Wages, and Labor Market Fluctuations

Author

Listed:
  • Chahrour, Ryan

    (Department of Economics)

  • Chugh, Sanjay K.

    (Department of Economics)

  • Potter, Tristan

    (Drexel University)

Abstract

We identify the main shock driving the covariance of the labor market and output. The shock drives strong business cycle comovement among output, consumption, investment, hours, and stock prices but is essentially orthogonal to business cycle fluctuations in TFP. Yet, the shock is associated with future persistent TFP fluctuations, consistent with theories of technology news. A standard labor search model in which wages are determined by a cash flow sharing rule, rather than the net present value of match surplus, matches the observed responses to TFP news. The response of the wage implied by this rule is consistent with the empirical responses of a broad panel of wage series

Suggested Citation

  • Chahrour, Ryan & Chugh, Sanjay K. & Potter, Tristan, 2020. "Productivity News, Wages, and Labor Market Fluctuations," School of Economics Working Paper Series 2020-3, LeBow College of Business, Drexel University.
    • Handle: RePEc:ris:drxlwp:2020_003
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    More about this item

    Keywords

    News Shocks; Wages; Search and Matching; Business Cycles;
    All these keywords.

    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
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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