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The Vanishing Procyclicality of Labor Productivity

Jordi Galí () and Thijs van Rens ()

No 9853, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We document three changes in postwar US macroeconomic dynamics: (i) the procyclicality of labor productivity vanished, (ii) the relative volatility of employment rose, and (iii) the relative (and absolute) volatility of the real wage rose. We propose an explanation for all three changes that is based on a common source: the decline in labor market turnover, which reduced hiring frictions. We develop a simple model with hiring frictions, variable effort, and endogenous wage rigidities to illustrate the mechanisms underlying our explanation. We show that the decline in turnover may also have contributed to the observed decline in output volatility.

Keywords: effort choice; hiring frictions; labor hoarding; labor market turnover; wage rigidities (search for similar items in EconPapers)
JEL-codes: E24 E32 (search for similar items in EconPapers)
Date: 2014-03
New Economics Papers: this item is included in nep-dge, nep-lab and nep-mac
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Citations: View citations in EconPapers (27) Track citations by RSS feed

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Related works:
Working Paper: The Vanishing Procyclicality of Labour Productivity (2020) Downloads
Working Paper: The Vanishing Procyclicality of Labour Productivity (2020) Downloads
Working Paper: The Vanishing Procyclicality of Labor Productivity (2015) Downloads
Working Paper: The Vanishing Procyclicality of Labor Productivity (2014) Downloads
Working Paper: The Vanishing Procyclicality of Labor Productivity (2014) Downloads
Working Paper: The Vanishing Procyclicality of Labor Productivity (2010) Downloads
Working Paper: The Vanishing Procyclicality of Labor Productivity (2010) Downloads
Working Paper: The vanishing procyclicality of labor productivity (2010) Downloads
Working Paper: The vanishing procyclicality of labor productivity (2010) Downloads
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