Labor Hoarding, Inflexible Prices, and Procyclical Productivity / Julio J. Rotemberg, Lawrence H. Summers.

By:

Rotemberg, Julio J

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w2591.Publication details: Cambridge, Mass. National Bureau of Economic Research 1988.Description: 1 online resource: illustrations (black and white)Subject(s):

E - Macroeconomics and Monetary Economics

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Abstract: Hall has pointed out that, when there is perfect competition and price flexibility, labor hoarding alone will not induce the Solow residual measured using labor's share in revenues to be procyclical. We show that, even with perfect competition, a small amount of price rigidity - we assume firms must set price slightly before the level of demand becomes known - makes the extent of procyclical productivity depend mainly on the extent of labor hoarding. We show that indeed, whether productivity is measured via the Solow method using labor's share in revenues or using other methods, it tends to be more procyclical in industries and in nations where labor hoarding is more important

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Working Paper	Biblioteca Digital	Colección NBER	nber w2591 (Browse shelf(Opens below))	Not For Loan

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May 1988.

Hall has pointed out that, when there is perfect competition and price flexibility, labor hoarding alone will not induce the Solow residual measured using labor's share in revenues to be procyclical. We show that, even with perfect competition, a small amount of price rigidity - we assume firms must set price slightly before the level of demand becomes known - makes the extent of procyclical productivity depend mainly on the extent of labor hoarding. We show that indeed, whether productivity is measured via the Solow method using labor's share in revenues or using other methods, it tends to be more procyclical in industries and in nations where labor hoarding is more important