Lumpy labor adjustment as a propagation mechanism of business cycles

Arbeitspapier

I explore the implications of the lumpy labor adjustment as a propagation mechanism for aggregate dynamics. The model I use nests the basic RBC model with a staggered-job-turnover in the spirit of Taylor (1980) and Calvo (1983). It extends this approach by introducing a Weibull-distributed labor adjustment process to capture increasing hazard rates and heterogeneous labor rigidity in the economy corroborated by the micro data. My principal findings are: uncertainty in the labor adjustment process induces firms to make precautionary labor adjustment (the front-loading effect), amplifying the volatility of labor demand, and that the heterogeneity in labor rigidity leads to aggregate persistence in labor and output. The key message conveyed by this model is that heterogeneity in labor rigidity matters for the aggregate dynamics, and hence includes the information of the distribution of agents enriching the propagation mechanism of the RBC model.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: SFB 649 Discussion Paper ; No. 2008,022

Classification and Topics

• Classification: Wirtschaft ; Business Fluctuations; Cycles ; Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity ; Investment; Capital; Intangible Capital; Capacity
• Subject: Business cycles ; Heterogeneous labor rigidity ; Weibull distribution ; Increasing hazard function ; Konjunkturtheorie ; Dynamisches Gleichgewicht ; Arbeitsmobilität ; Anpassung ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Yao, Fang
• Event: Veröffentlichung
• (who): Humboldt University of Berlin, Collaborative Research Center 649 - Economic Risk
• (where): Berlin
• (when): 2008

Further information

• Handle: http://hdl.handle.net/10419/25264
• Last update: 10.03.2025, 11:45 AM CET