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:	2013-12-01
Authors:	Mandelman, Federico S. ; Zanetti, Francesco
Institutions:	Federal Reserve Bank of Atlanta
Subject:	technology shocks \| employment \| labor market frictions

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Extent:	application/pdf
Series:	Working Paper.
Type of publication:	Book / Working Paper
Notes:	The text is part of a series Working Paper Number 2013-16 25 pages
Classification:	E32 - Business Fluctuations; Cycles
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010732476