Publication: Accounting for labor productivity puzzle
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2016-02-17
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Abstract
In the recent decades aggregate labor productivity in the U.S. became counter-
cyclical (labor productivity puzzle). At the same time the U.S. experienced dramatic
changes in the structure of households due to increased female labor force partici-
pation. I show that changes in the household structure and corresponding changes
in labor supply behavior can explain the labor productivity puzzle. I build a model
with heterogeneous one- and two-earner households and aggregate technology shocks
and calibrate it to the current U.S. data. I impose the household structure change in
the model and show that the behavior of labor productivity changes from procyclical
to countercyclical, as in the U.S. I also show that individual labor supply volatility
depends on the role of the earner in the household. Increase in the proportion of
multiple-earner households leads to increase in aggregate labor supply volatility.
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Keywords
Business cycles, Family labor supply, Multiple-earner households