Labor Hoarding, Inflexible Prices, and Procyclical Productivity

45 Pages Posted: 8 Jun 2004 Last revised: 8 Aug 2010

See all articles by Julio J. Rotemberg

Julio J. Rotemberg

Harvard University, Business, Government and the International Economy Unit (deceased); National Bureau of Economic Research (NBER) (deceased)

Lawrence H. Summers

Harvard University; National Bureau of Economic Research (NBER); Harvard University - Harvard Kennedy School (HKS)

Date Written: May 1988

Abstract

Hall has pointed out that, when there is perfect competition and price flexibility, labor hoarding alone will not induce the Solow residual measured using labor's share in revenues to be procyclical. We show that, even with perfect competition, a small amount of price rigidity - we assume firms must set price slightly before the level of demand becomes known - makes the extent of procyclical productivity depend mainly on the extent of labor hoarding. We show that indeed, whether productivity is measured via the Solow method using labor's share in revenues or using other methods, it tends to be more procyclical in industries and in nations where labor hoarding is more important

Suggested Citation

Rotemberg, Julio J. and Summers, Lawrence H., Labor Hoarding, Inflexible Prices, and Procyclical Productivity (May 1988). NBER Working Paper No. w2591. Available at SSRN: https://ssrn.com/abstract=304855

Julio J. Rotemberg (Contact Author)

Harvard University, Business, Government and the International Economy Unit (deceased) ( email )

Cambridge, MA
United States
617-495-1015 (Phone)
617-496-5994 (Fax)

National Bureau of Economic Research (NBER) (deceased)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Lawrence H. Summers

Harvard University ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States
617-495-1502 (Phone)
617-495-8550 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
21
Abstract Views
793
PlumX Metrics