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Flexible prices, labor market frictions, and the response of employment to technology shocks

Federico Mandelman () and Francesco Zanetti ()

No 2013-16, FRB Atlanta Working Paper from Federal Reserve Bank of Atlanta

Abstract: Recent empirical evidence establishes that a positive technology shock leads to a decline in labor inputs. Can a flexible price model enriched with labor market frictions replicate this stylized fact? We develop and estimate a standard flexible price model using Bayesian methods that allows, but does not require, labor market frictions to generate a negative response of employment to a technology shock. We find that labor market frictions account for the fall in labor inputs.

Keywords: technology shocks; employment; labor market frictions (search for similar items in EconPapers)
JEL-codes: E32 (search for similar items in EconPapers)
Date: 2013-12-01
New Economics Papers: this item is included in nep-dge, nep-lab and nep-mac
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Journal Article: Flexible prices, labor market frictions and the response of employment to technology shocks (2014) Downloads
Working Paper: Flexible prices, labor market frictions and the response of employment to technology shocks (2013) Downloads
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