The Vanishing Procyclicality of Labour Productivity

Why have business cycle fluctuations become less volatile?

Jordi Galí and Thijs van Rens

The Economic Journal, 2021, vol. 131, issue 633, 302-326

Abstract: We document two changes in post-war US macroeconomic dynamics: the procyclicality of labour productivity vanished, and the relative volatility of employment rose. We propose an explanation for these changes that is based on reduced hiring frictions due to improvements in information about the quality of job matches and the resulting decline in turnover. We develop a simple model with hiring frictions and variable effort to illustrate the mechanisms underlying our explanation. We show that our model qualitatively and quantitatively matches the observed changes in business cycle dynamics.

Date: 2021
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Citations: View citations in EconPapers (10)

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Related works:
Working Paper: The Vanishing Procyclicality of Labour Productivity (2020)
Working Paper: The Vanishing Procyclicality of Labor Productivity (2015)
Working Paper: The Vanishing Procyclicality of Labor Productivity (2014)
Working Paper: The Vanishing Procyclicality of Labor Productivity (2014)
Working Paper: The Vanishing Procyclicality of Labor Productivity (2010)
Working Paper: The Vanishing Procyclicality of Labor Productivity (2010)
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