Testing for Keynesian Labor Demand

Mark Bils, Pete Klenow and Benjamin Malin

No 18149, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: According to the textbook Keynesian model, short-run demand for labor is sensitive to the demand for goods. In this view, sellers deviate from setting the marginal product of labor proportional to the real wage, instead enduring or choosing lower price markups when demand for goods is high. We test this prediction across U.S. industries in the two decades up through the Great Recession. To identify movements in goods demand, we exploit how durability varies across 70 categories of consumption and investment. We also take into account the flexibility of prices and capital-intensity of production across goods. We find evidence in support of Keynesian Labor Demand.

JEL-codes: E12 E2 E3 E6 (search for similar items in EconPapers)
Date: 2012-06
New Economics Papers: this item is included in nep-mac
Note: EFG ME
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Citations: View citations in EconPapers (34)

Published as Mark Bils & Peter J. Klenow & Benjamin A. Malin, 2013. "Testing for Keynesian Labor Demand," NBER Macroeconomics Annual, University of Chicago Press, vol. 27(1), pages 311 - 349.
Published as Testing for Keynesian Labor Demand , Mark Bils, Peter J. Klenow, Benjamin A. Malin. in NBER Macroeconomics Annual 2012, Volume 27 , Acemoglu, Parker, and Woodford. 2013

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