Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/235892 
Year of Publication: 
2021
Series/Report no.: 
Deutsche Bundesbank Discussion Paper No. 22/2021
Publisher: 
Deutsche Bundesbank, Frankfurt a. M.
Abstract: 
Labor productivity is more procyclical in OECD countries with lower employment volatility. To capture this new stylized fact, we propose a business cycle model with employment adjustment costs, variable hours and labor effort. We show that, in our model with variable effort, greater labor market frictions are associated with procyclical labor productivity as well as stable employment. In contrast, the constant-effort model fails to replicate the observed cross-country pattern in the data. By implication, labor market deregulation has a greater effect on the cyclicality of labor productivity and on the relative volatility of employment when effort can vary.
Subjects: 
effort
hours
labor adjustment
labor market deregulation
labor productivity
structural reform
JEL: 
E30
E50
E60
ISBN: 
978-3-95729-830-0
Document Type: 
Working Paper

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