Trends in aggregate employment, hours worked per worker, and the long-run labor wedge
Rahul Mukherjee (),
Alan Finkelstein Shapiro () and
MPRA Paper from University Library of Munich, Germany
Hours worked are fundamentally important for aggregate economic activity, yet canonical macroeconomic models fail dramatically at tracking its long-run trends. We develop an intuitive and tractable extension of the canonical model that decomposes trend hours into extensive and intensive margins via household-side employment-attainment costs and firm-side employment adjustment costs. Its predictions track very well the trend behavior of hours, and its two underlying margins, in the United States and a host of OECD countries. Our framework is relevant for analyzing the long run labor-market effects of a number of factors such as productivity growth, and tax or labor-market reforms.
Keywords: CLM model; DLM model; Europe; hours worked per population; labor-market policy; long-run labor wedge; OECD countries; taxes; United States; U.S. tax puzzle. (search for similar items in EconPapers)
JEL-codes: E60 H20 J20 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-lma and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:99289
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