TY  - RPRT
        AU  - Galí, Jordi
AU  - Rens, Thijs van
        TI  - The Vanishing Procyclicality of Labor Productivity
        PY  - 2010/Jul/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 5099
        UR  - https://www.iza.org/publications/dp5099
        AB  - 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.
        KW  - effort choice
KW  - wage rigidities
KW  - labor market frictions
KW  - labor hoarding
        ER  -