Arbeitspapier

Lumpy labor adjustment as a propagation mechanism of business cycles

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.

Language
Englisch

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

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

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

Handle
Last update
10.03.2025, 11:45 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Yao, Fang
  • Humboldt University of Berlin, Collaborative Research Center 649 - Economic Risk

Time of origin

  • 2008

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