The Implications of Convex Structure on the Fluctuations of Employment and Real Wages

Chang Kon Choi

Korean Economic Review, 1995, vol. 11, issue 1, 103-120

Abstract: Employing the stochastic growth model, this paper examines the implications of strict convex preferences and technology on the asymmetric movement of the labor market. With convex preferences and technology, hours increase at a decreasing rate with respect to the shock. Under the same conditions, wages increase either at a decreasing or at an increasing rate with respect to the shock, depending on the nature of labor supply function. So, this study suggests a structural explanation for the asymmetric economic fluctuations observed over the cycle.

Date: 1995
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