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

Francesco Zanetti and Federico Mandelman

No 683, Economics Series Working Papers from University of Oxford, Department of Economics

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: 2013-11-13
New Economics Papers: this item is included in nep-dge, nep-lab and nep-mac
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Related works:
Journal Article: Flexible prices, labor market frictions and the response of employment to technology shocks (2014)
Working Paper: Flexible prices, labor market frictions, and the response of employment to technology shocks (2013)
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