Labor productivity, effort and the Euro Area business cycle

Vivien Lewis and Stefania Villa

No 18389, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Labor productivity is highly procyclical in the Euro Area. We investigate the sources of this procyclicality in an estimated New Keynesian business cycle model with labor search frictions and variable factor utilization in both capital and labor. Labor input can vary along three margins: employment, hours, and effort (or utilization). We find evidence for a significant use of the effort margin in labor adjustment. Moreover, a model with effort outperforms one with variable capital utilization or dominant technology shocks. Finally, the effort margin dampens inflation volatility.

Date: 2023-08
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP18389 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: Labor productivity, effort and the euro area business cycle (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:18389

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP18389

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().