Part and Full-Time Employment over the Business Cycle

41 Pages Posted: 18 Feb 2021

Date Written: December 21, 2020

Abstract

We develop a model that allows us to understand the cyclicality of part and full-time employment. In the model, labor market frictions generate a surplus between workers and firms, who jointly decide whether their employment relationship is best suited for part or full-time work based on match quality shocks and the broader economic environment. Lower acyclical costs cause the surplus of part-time matches to vary less with the business cycle than the surplus of full-time matches. As a consequence, the model is able to generate procyclical full-time employment and countercyclical part-time employment as observed in the data. We also show that ignoring part-time employment understates the impact on employment and inequality of a recession and that subsidizing part-time work is far more effective than increasing unemployment insurance at preventing a labor market downturn.

Keywords: part-time employment, search, matching, bargaining

JEL Classification: D8, J6, D6

Suggested Citation

Griffy, Benjamin and Gomis-Porqueras, Pedro, Part and Full-Time Employment over the Business Cycle (December 21, 2020). Available at SSRN: https://ssrn.com/abstract=3752961 or http://dx.doi.org/10.2139/ssrn.3752961

Benjamin Griffy (Contact Author)

SUNY University at Albany ( email )

1400 Washington Avenue
Building, Room 109
Albany, NY 12222
United States

Pedro Gomis-Porqueras

Deakin University ( email )

Australia

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