Business Cycle, Great Recession and Part-time Jobs

Hyunju Kang (), Jaevin Park and Hyunduk Suh

No 2018-1, Inha University IBER Working Paper Series from Inha University, Institute of Business and Economic Research

Abstract: During the Great Recession, the U.S. economy witnessed a substantial rise in part-time employment for sustained periods. We extend the New Keynesian-unemployment model by Gali et al. (2012) to allow substitution between full-time and part-time labor and estimate the model's parameters using the Bayesian method. In our model, households and firms can optimally allocate full-time and part-time labor. Moreover, disturbances exist in part-time labor supply (household disutility in part-time labor) and part-time labor demand (firms' efficiency to utilize part-time labor). Although several shocks were found to cause the transition to part-time jobs during the recession, the most important factor was the part-time labor supply shock that increases part-time participation. The transition from full-time to part-time jobs, caused by part-time labor market shocks, mitigated the contraction in output during the recession. Part-time labor supply shock also explains a significant portion of slow recovery in gross wage during the recession, as the shock lowers part-time wage as well as the proportion of full-time workers in total employment.

Keywords: Part-time labor; Great Recession; Unemployment; New Keynesian model (search for similar items in EconPapers)
JEL-codes: E24 E47 E52 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2018-02-21, Revised 2018-02-21
New Economics Papers: this item is included in nep-dge and nep-mac
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Citations: View citations in EconPapers (1)

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