Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/98635
Authors: 
Gu, Grace Weishi
Year of Publication: 
2013
Series/Report no.: 
Working Papers, UC Santa Cruz Economics Department 717
Abstract: 
This paper explores how much firm-paid employee benefits and firms' financial conditions have contributed to delayed employment recoveries relative to output since 1990, using a DSGE model. Empirically, I document the underexplored pro-cyclicality of per worker benefit costs. Post-1990 period differs from before in that: (1) there have been larger increases of such quasi-fixed employment costs at recoveries; (2) tight financial conditions have also persisted longer into recent recoveries. The model generates 3-to-7-quarter delays in employment recoveries for the post-1990 period but no delay for before, consistent with data; and it produces more than 76 percent of employment volatility.
Subjects: 
Employment recoveries
benefit costs
extensive and intensive margins
financial conditions
enforcement constraint
DSGE model
business cycle
dynamic programming
JEL: 
E32
J33
J21
C68
C61
Document Type: 
Working Paper

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