The vanishing procyclicality of labor productivity

Arbeitspapier

We document three changes in postwar US macroeconomic dynamics: (i) the procyclicality of labor productivity has vanished, (ii) the relative volatility of employment has risen, and (iii) the relative (and absolute) volatility of the real wage has risen. We propose an explanation for all three changes that is based on a common source: a decline in labor market frictions. We develop a simple model with labor market frictions, variable effort, and endogenous wage rigidities to illustrate the mechanisms underlying our explanation. We show that the reduction in frictions may also have contributed to the observed decline in output volatility.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Kiel Working Paper ; No. 1641

Classification and Topics

• Classification: Wirtschaft ; Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity ; Business Fluctuations; Cycles
• Subject: Labor hoarding ; labor market frictions ; wage rigidities ; effort choice ; Arbeitsproduktivität ; Konjunktur ; Beschäftigung ; Volatilität ; Reallohn ; Lohnrigidität ; Arbeitsmarktflexibilisierung ; Arbeitsnachfrage ; Schätzung ; USA

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Galí, Jordi ; van Rens, Thijs
• Event: Veröffentlichung
• (who): Kiel Institute for the World Economy (IfW)
• (where): Kiel
• (when): 2010

Further information

• Handle: http://hdl.handle.net/10419/39656
• Last update: 10.03.2025, 11:43 AM CET