The cyclicality of the user cost of labor

Marianna Kudlyak

Journal of Monetary Economics, 2014, vol. 68, issue C, 53-67

Abstract: The user cost of labor is the expected difference between the present discounted value of wages paid to a worker hired in the current period and that paid to a worker hired in the next period. Analogous to the price of any long-term asset, the user cost, not wage, is the relevant price for a firm that is considering adding a worker. I construct its counterpart in the data and estimate that it is substantially more procyclical than average wages or wages of newly hired workers. I demonstrate an application of the finding using the textbook search and matching model.

Keywords: User cost of labor; Cyclicality; Wage rigidity; Search and matching (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (68)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:68:y:2014:i:c:p:53-67

DOI: 10.1016/j.jmoneco.2014.07.007

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