Labor productivity, effort and the euro area business cycle
Vivien Lewis (),
Stefania Villa () and
No 44/2019, Discussion Papers from Deutsche Bundesbank
The Euro Area is characterized by little variation in unemployment and strongly procyclical labor productivity. We capture both characteristics in a New Keynesian business cycle model with labor search frictions, where labor can vary along three margins: employment, hours, and effort. We estimate the model with Bayesian methods and find evidence for a significant use of the effort margin in generating procyclical productivity. We show that a model with labor effort is more successful at matching the business cycle facts than is one with variable capital utilization or dominant technology shocks. Finally, we demonstrate that effort dampens the response of inflation to exogenous shocks.
Keywords: effort; labor utilization; labor productivity; inflation (search for similar items in EconPapers)
JEL-codes: E30 E50 E60 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-eec, nep-mac and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdps:442019
Access Statistics for this paper
More papers in Discussion Papers from Deutsche Bundesbank Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().