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Trends in aggregate employment, hours worked per worker, and the long-run labor wedge

Brendan Epstein, Rahul Mukherjee (), Alan Finkelstein Shapiro () and Shanthi Ramnath

MPRA Paper from University Library of Munich, Germany

Abstract: 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)
Date: 2020-03
New Economics Papers: this item is included in nep-dge, nep-lma and nep-mac
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