Productivity and the Labor Market: Comovement Over the Business Cycle

17 Pages Posted: 30 Aug 2011

See all articles by Marcus Hagedorn

Marcus Hagedorn

affiliation not provided to SSRN

Iourii Manovskii

University of Pennsylvania - Department of Economics; IZA Institute of Labor Economics

Date Written: August 2011

Abstract

The productivity‐driven Mortensen–Pissarides model predicts that labor productivity is strongly correlated with labor market variables whereas these correlations were argued to be much weaker in the data, especially since the 1980s. We first document that the size of these discrepancies between the data and the model becomes substantially smaller if employment data from the Current Population Survey is used in measuring productivity instead of the commonly used employment data from the Current Employment Statistics. Second, we show that incorporating time to build and a stochastic value of home production helps reconcile the quantitative performance of the model with the data.

Suggested Citation

Hagedorn, Marcus and Manovskii, Iourii, Productivity and the Labor Market: Comovement Over the Business Cycle (August 2011). International Economic Review, Vol. 52, Issue 3, pp. 603-619, 2011. Available at SSRN: https://ssrn.com/abstract=1919395 or http://dx.doi.org/10.1111/j.1468-2354.2011.00641.x

Marcus Hagedorn

affiliation not provided to SSRN

Iourii Manovskii

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
133 South 36th Street
Philadelphia, PA 19104-6297
United States
215-898-6880 (Phone)
215-573-2057 (Fax)

HOME PAGE: http://www.econ.upenn.edu/~manovski/

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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