Flexible prices, labor market frictions, and the response of employment to technology shocks

Recent empirical evidence establishes that a positive technology shock leads to a decline in labor inputs. Can a flexible price model enriched with labor market frictions replicate this stylized fact? We develop and estimate a standard flexible price model using Bayesian methods that allows, but does not require, labor market frictions to generate a negative response of employment to a technology shock. We find that labor market frictions account for the fall in labor inputs.

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Year of publication:	2013
Authors:	Mandelman, Federico S. ; Zanetti, Francesco
Publisher:	Atlanta, GA : Federal Reserve Bank of Atlanta
Subject:	technology shocks \| employment \| labor market frictions

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Series:	Working Paper ; 2013-16
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	773124721 [GVK] hdl:10419/101001 [Handle] RePEc:fip:fedawp:2013-16 [RePEc]
Classification:	E32 - Business Fluctuations; Cycles
Source:	EconStor

Persistent link: https://www.econbiz.de/10010397672