Title: Labor adjustment and productivity in the OECD
Authors: Vivien Lewis - Deutsche Bundesbank (Germany) [presenting]
Maarten Dossche - European Central Bank (Germany)
Andrea Giovanni Gazzani - Bank of Italy (Italy)
Abstract: Labor productivity is more procyclical in countries with lower unemployment volatility. To capture this new stylized fact, we propose a business cycle model with firing costs, variable hours and effort. Effort helps to capture the procyclicality of labor productivity in the presence of demand shocks. A structural reform that reduces firing costs leads to a greater expansion of employment when effort can vary. Moreover, labor market deregulation makes labor productivity less procyclical.