Full Citation

Title: Why Does Trend Growth Affect Equilibrium Employment? A New Explanation of an Old Puzzle

Citation Type: Journal Article

Publication Year: 2012

ISBN:

ISSN:

DOI:

NSFID:

PMCID:

PMID:

Abstract: That the employment rate appears to respond to changes in trend growth is an enduring macroeconomic puzzle. This paper shows that, in the presence of a return to experience, a slowdown in produc- tivity growth raises reservation wages, thereby lowering aggregate employment. The paper develops new evidence that shows this mech- anism is important for explaining the growth-employment puzzle. The combined effects of changes in aggregate wage growth and returns to experience account for all the increase from 1968 to 2006 in non- employment among low-skilled men and for approximately half the increase in nonemployment among all men.

Url: http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.650.2823&rep=rep1&type=pdf

User Submitted?: No

Authors: Elsby, Michael, WL; Shapiro, Matthew, D

Periodical (Full): American Economic Review

Issue: 4

Volume: 102

Pages: 1378–1413

Data Collections: IPUMS USA

Topics: Labor Force and Occupational Structure

Countries: