The Vanishing Procyclicality of Labor Productivity
We document three changes in postwar US macroeconomic dynamics: (i) the procyclicality of labor productivity has vanished, (ii) the relative volatility of employment has risen, and (iii) the relative (and absolute) volatility of the real wage has risen. We propose an explanation for all three changes that is based on a common source: a decline in labor market frictions. We develop a simple model with labor market frictions, variable effort, and endogenous wage rigidities to illustrate the mechanisms underlying our explanation. We show that the reduction in frictions may also have contributed to the observed decline in output volatility.
All data refer to the US over the postwar period and are obtained from publicly available sources, see the paper for details.
· Stata code used to construct this dataset from original data sources
· Stata code to calculate business cycle statistics (with standard errors)
· Matlab code to produced the simulated moments
· Dynare mod-file with the model definition
If you have any questions about these data or programs, please email me.