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Molnarova, Zuzana
ORCID: https://orcid.org/0000-0002-8377-1032
(2020)
Industry evidence and the vanishing cyclicality of labor productivity.
University of Vienna, Department of Economics, Vienna Economic Papers 2001,
56 p.
DOI: 2001
Abstract
Aggregate labor productivity used to be strongly procyclical in the United States, but the procyclicality has largely disappeared since the mid-1980s. This paper explores the industry-level evidence in order to discriminate between existing explanations of the vanishing procyclicality of the labor productivity. I document the change in the cyclical properties of productivity in the U.S. using industry-level data and focus on a particularly puzzling feature, namely that the correlations of the industry productivity with industry output and labor input remained on average much more stable before and after the mid-1980s compared to the aggregate correlations. In other words, there is little evidence for the vanishing cyclicality of labor productivity at the industry level. I construct a simple industry-level RBC model that nests two leading explanations of the vanishing cyclicality of productivity that have been proposed in the literature. I show that the two explanations have qualitatively different predictions for the cyclical properties of industry-level variables. The mechanism based on a structural change in the composition of aggregate shocks is able to replicate the stability of industry-level moments across time. In contrast, the mechanism based on increased labor market flexibility is less successful in matching the industry-level evidence.
| Item Type: | Discussion/ Working Paper (["eprint_fieldopt_monograph_type_technicalreport" not defined]) |
|---|---|
| Keywords: | business cycles, productivity, industries, factor utilization, Great Moderation |
| Funders: | Österreichische Nationalbank (Jubiläumsfonds) |
| Classification Codes (e.g. JEL): | E32, E24, E37 |
| Research Units: | Former Research Units (until 2020) > Macroeconomics and Economic Policy |
| Related URLs: | |
| Date Deposited: | 18 Jan 2021 15:05 |
| Last Modified: | 28 Jul 2023 05:10 |
| DOI: | 2001 |
| URI: | https://irihs.ihs.ac.at/id/eprint/5626 |
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