Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/209577
Authors: 
Lewis, Vivien
Villa, Stefania
Wolters, Maik H.
Year of Publication: 
2019
Series/Report no.: 
Bundesbank Discussion Paper 44/2019
Abstract: 
The Euro Area is characterized by little variation in unemployment and strongly procyclical labor productivity. We capture both characteristics in a New Keynesian business cycle model with labor search frictions, where labor can vary along three margins: employment, hours, and effort. We estimate the model with Bayesian methods and find evidence for a significant use of the effort margin in generating procyclical productivity. We show that a model with labor effort is more successful at matching the business cycle facts than is one with variable capital utilization or dominant technology shocks. Finally, we demonstrate that effort dampens the response of inflation to exogenous shocks.
Subjects: 
effort
labor utilization
labor productivity
inflation
JEL: 
E30
E50
E60
ISBN: 
978-3-95729-649-8
Document Type: 
Working Paper

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