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Title:The vanishing procyclicality of labor productivity PDF Logo
Authors:Galí, Jordi
van Rens, Thijs
Issue Date:2010
Series/Report no.:Kiel working paper 1641
Abstract: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.
Subjects:Labor hoarding
labor market frictions
wage rigidities
effort choice
JEL:E24
E32
Document Type:Working Paper
Appears in Collections:Publikationen von Forscherinnen und Forschern des IfW
Kieler Arbeitspapiere, IfW

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