What Does It Take to Explain Procyclical Productivity?
Labor productivity comoves strongly with output, leads output and employment, and is only weakly correlated with employment. Procyclical productivity is observed in virtually all countries and industries, and it is observed even in periods of fluctuations due to pure demand shocks, such as during the Great Depression and the second World War. This paper shows that a standard RBC model driven by demand shocks alone is able to explain procyclical productivity without the need to resort to technology shocks or increasing returns to scale. The key element is labor hoarding due to adjustment cost of labor. It is also shown that the observed cross-country differences in productivity cycles can be rationalized by a single parameter alone - the size of the adjustment cost of labor.
Year of publication: |
2004
|
---|---|
Authors: | Yi, Wen |
Published in: |
The B.E. Journal of Macroeconomics. - De Gruyter, ISSN 1935-1690. - Vol. 4.2004, 1, p. 1-40
|
Publisher: |
De Gruyter |
Saved in:
Online Resource
Saved in favorites
Similar items by person
-
Production and inventory behavior of capital
Wen, Yi, (2007)
-
Uniform working hours and structural unemployment
Liu, Haoming, (2007)
-
Measuring interest rates as determined by thrift and productivity
Choi, Woon Gyu, (2007)
- More ...