Unemployment and Productivity in the Long Run: The Role of Macroeconomic Volatility

Benigno, Pierpaolo; Ricci, Luca; Surico, Paolo

doi:10.1162/rest_a_00508

Cited by 29 publications

(19 citation statements)

References 51 publications

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“…If the long-run relationship between productivity and unemployment is influenced by the volatility of the former one (Benigno et al, 2015), the Great Moderation can be a source of regime change in the relation between the two. More specifically, if the benefits of a reduced GDP volatility are greater in recessions than in expansions, the relationship among technology, employment and output can change.…”

Section: Transmission Mechanismsmentioning

confidence: 99%

Macroeconomic Regimes, Technological Shocks and Employment Dynamics

Ferraresi¹,

Roventini

Semmler

2016

SSRN Journal

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In this work we investigate the interrelations among technology, output and employment in the different states of the U.S. economy (recessions vs. expansions). More precisely, we estimate different threshold vector autoregression (TVAR) models with TFP, hours, and GDP, employing the latter as threshold variable, and we assess the ensuing generalized impulse responses of GDP and hours as to TFP shocks. We find that positive productivity shocks, while spurring GDP growth, display a negative effect on hours worked at least on impact, independently of the state of the economy. In the 1957-2011 period, the effects of productivity shocks on employment are abundantly negative in downturns, but they are not significantly different from zero in good times. However, the impact of TFP shocks in different business cycle regimes depends on the chosen sample: after the mid eighties , productivity shocks increase hours during recessions. Finally, we express and test some conjectures that might have caused the changes in the responses in different time periods.JEL Codes: E32, O33, C32, E63, E20

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Section: Transmission Mechanismsmentioning

confidence: 99%

Macroeconomic Regimes, Technological Shocks and Employment Dynamics

Ferraresi¹,

Roventini

Semmler

2016

SSRN Journal

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“…(2010), Jung and Kuester (2011) and Petrosky-Nadeau and Zhang (2013)) 1 . Benigno et al (2015) show that the relationship between macroeconomic volatility and average unemployment implied by such a model can be found in U.S. data. Ferraro (2017) also documents that the employment rate fluctuates asymmetrically over the business cycle in the U.S. and proposes an alternative explanation, based on endogenous job destruction and worker heterogeneity in skills.…”

Section: Introductionmentioning

confidence: 99%

“…As emphasized above, several papers have showed that the asymmetric unemployment dynamics generated by a simple search and matching model of the labor market can lead to substantial business cycle costs (Hairault et al. (2010), Jung and Kuester (2011) and Petrosky-Nadeau and Zhang (2013)) 1 . Benigno et al (2015) show that the relationship between macroeconomic volatility and average unemployment implied by such a model can be found in U.S. data.…”

Section: Introductionmentioning

confidence: 99%

Asymmetric unemployment fluctuations and monetary policy trade-offs

Lepetit

2020

Review of Economic Dynamics

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I show that labor market asymmetries are key to generating a quantitatively significant trade-off between inflation and unemployment stabilization in New Keynesian models with search and matching frictions in the labor market. In such an environment, a strong focus on inflation stabilization in response to shocks comes at the cost of larger labor market volatility. Because unemployment fluctuations are asymmetric, it also results in higher average unemployment. The optimal policy responds strongly to both inflation and employment and stabilizes labor market fluctuations. Most of the welfare gains from adopting this policy are accounted for by the increase in average employment relative to the price stability case. When labor market fluctuations are linear, the monetary authority loses its leverage over average unemployment, and a policy of price stability is close to optimal.

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“…Our analysis relates to empirical and theoretical studies on the asymmetry of labor market fluctuations over the business cycle. On the empirical side, the works by Neftci (1984), Altissimo and Violante (2001), Panagiotidis and Pelloni (2007), Barnichon (2012), Abbritti and Fahr (2013), Barattieri et al (2014), Caggiano et al (2014), and Benigno et al (2015) show that unemployment and wages fluctuate differently across phases of the business cycles. Compared to these studies, we show that state dependence in labor market fluctuations is linked to the level of aggregate productivity, and we extend the analysis to job transition rates.…”

Section: Introductionmentioning

confidence: 99%

State Dependence in Labor Market Fluctuations

Pizzinelli

Theodoridis

Zanetti

2020

Int Economic Review

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This paper documents state dependence in labor market fluctuations. Using a Threshold Vector Autoregression model (TVAR), we establish that the unemployment rate, the job separation rate, and the job finding rate exhibit a larger response to productivity shocks during periods with low aggregate productivity. A Diamond-Mortensen-Pissarides model with endogenous job separation and on-the-job search replicates these empirical regularities well. We calibrate the model to match the standard deviation of the job-transition rates explained by productivity shocks in the TVAR, and show that the model explains 88 percent of the state dependence in the unemployment rate, 76 percent for the separation rate and 36 percent for the job finding rate. The key channel underpinning state dependence in both job separation and job finding rates is the interaction of the firm's reservation productivity level and the distribution of match-specific idiosyncratic productivity. Results are robust across several variations to the baseline model.

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Unemployment and Productivity in the Long Run: The Role of Macroeconomic Volatility

Cited by 29 publications

References 51 publications

Macroeconomic Regimes, Technological Shocks and Employment Dynamics

Macroeconomic Regimes, Technological Shocks and Employment Dynamics

Asymmetric unemployment fluctuations and monetary policy trade-offs

State Dependence in Labor Market Fluctuations

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