Procyclical Labour Productivity, Increasing Returns to Labour and Labour Hoarding in Car Assembly Plant Employment

Ana Aizcorbe

Economic Journal, 1992, vol. 102, issue 413, 860-73

Abstract: This paper empirically examines the sources of procyclicality in labor productivity for a panel of U.S. auto assembly plants from 1978-85. An employment demand equation, derived from a cost-minimization model, is estimated to test for the presence of increasing returns and labor hoarding on the employment dimension. The data used match employment and wage data from the BLS Current Establishment Survey to publically available data on output and the nature of production at these plants. Statistical evidence in favor of both increasing returns and hoarding is found. These findings suggest that the observed procyclicality of labor productivity in this industry is due to both the nature of technology (increasing returns) as well as attempts by plant managers to maintain a reserve of experienced workers (labor hoarding). Copyright 1992 by Royal Economic Society.

Date: 1992
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