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The Vanishing Procyclicality of Labour Productivity

Jordi GalÌ and Thijs van Rens
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Thijs van Rens: University of Warwick, CAGE Centre

The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics

Abstract: We document two changes in postwar US macroeconomic dynamics : the procyclicality of labour productivity vanished, and the relative volatility of employment rose. We propose an explanation for these changes that is based on educed hiring frictions due to improvements in information about the quality of job matches and the resulting decline in turnover. We develop a simple model with hiring frictions and variable effort to illustrate the mechanisms underlying our explanation. We show that our model qualitatively and quantitatively matches the observed changes in business cycle dynamics.

Keywords: labour hoarding; hiring frictions; effort choice JEL codes: E24 ' E32 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-dge, nep-mac and nep-ore
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Persistent link: https://EconPapers.repec.org/RePEc:wrk:warwec:1271

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