Employment, Labour Utilization and Procyclical Labour Productivity.

The paper provides a theoretical and empirical framework to analyze the effects of change in various labor-cost parameters on employment and labor utilization. By accounting for overtime work, a nonlinear cost scheme is obtained that can serve as an explanation of procyclic al movements in labor productivity. A generalized Leontief system, based on an onlinear labor-cost scheme, is estimated for employment, average hours worked, and capital input. The empirical evidence is consistent with the stylized fact of procyclical labor productivity. A reduction of standard hours leads to a loss in employment. Copyright 1988 by WWZ and Helbing & Lichtenhahn Verlag AG