Employment and Hours over the Business Cycle in a Model with Search Frictions

Noritaka Kudoh, Hiroaki Miyamoto and Masaru Sasaki ()
Additional contact information
Masaru Sasaki: Osaka University

No 8946, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper studies a labor market search-matching model with multi-worker firms to investigate how firms utilize the extensive and intensive margins over the business cycle. The earnings function derived from the Stole-Zwiebel bargaining acts as an adjustment cost function for employment and hours. We calibrate the model to match the Japanese labor market, in which the intensive margin accounts for 79% of the variations in total working hours. The model replicates the observed cyclical behavior of hours of work, but fails to generate employment volatility of realistic magnitude. Additional penalties for longer hours of work do not resolve this issue. Wage rigidity and persistent shocks are promising lines of further investigations.

Keywords: multi-worker firms; search; hours of work; business cycles (search for similar items in EconPapers)
JEL-codes: E32 J20 J64 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2015-03
New Economics Papers: this item is included in nep-dge, nep-lab and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Related works:
Journal Article: Employment and Hours over the Business Cycle in a Model with Search Frictions (2019)
Working Paper: Employment and Hours over the Business Cycle in a Model with Search Frictions (2018)
Working Paper: Employment and hours over the business cycle in a model with search frictions (2016)
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