Labor Productivity: Structural Change and Cyclical Dynamics

27 Pages Posted: 19 Jun 1998 Last revised: 30 Sep 2010

See all articles by Eric J. Bartelsman

Eric J. Bartelsman

Vrije Universiteit Amsterdam; Tinbergen Institute; IZA Institute of Labor Economics

John Haltiwanger

University of Maryland - Department of Economics; National Bureau of Economic Research (NBER); Institute for the Study of Labor (IZA)

Martin Neil Baily

Institute for International Economics; University of Maryland

Date Written: March 1996

Abstract

A longstanding puzzle of empirical economics is that average labor productivity declines during recessions and increases during booms. This paper provides a framework to assess the empirical importance of competing hypotheses for explaining the observed procyclicality. For each competing hypothesis we derive the implications for cyclical productivity conditional on expectations of future demand and supply conditions. The novelty of the paper is that we exploit the tremendous heterogeneity in long-run structural changes across individual plants to identify the short-run sources of procyclical productivity. Our findings favor an adjustment cost model which involves a productivity penalty for downsizing as the largest source of procyclical labor productivity.

Suggested Citation

Bartelsman, Eric J. and Haltiwanger, John C. and Baily, Martin Neil, Labor Productivity: Structural Change and Cyclical Dynamics (March 1996). NBER Working Paper No. w5503. Available at SSRN: https://ssrn.com/abstract=3018

Eric J. Bartelsman (Contact Author)

Vrije Universiteit Amsterdam ( email )

Amsterdam, ND North Holland
Netherlands
+31 (0)20 44 46044 (Phone)

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

IZA Institute of Labor Economics

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

John C. Haltiwanger

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States
301-405-3504 (Phone)
301-405-3542 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Institute for the Study of Labor (IZA) ( email )

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

Martin Neil Baily

Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036-1903
United States

University of Maryland

College Park
College Park, MD 20742
United States

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