Working Paper: NBER ID: w14697
Authors: Nir Jaimovich; Seth Pruitt; Henry E. Siu
Abstract: The employment and hours worked of young individuals fluctuate much more over the business cycle than those of prime-aged individuals. Understanding the mechanism underlying this observation is key to explaining the volatility of aggregate hours over the cycle. We argue that the joint behavior of age-specific hours and wages in the U.S. data point to differences in the cyclical characteristics of labor demand. To articulate this view, we consider a production technology displaying capital-experience complementarity. We estimate the key parameters governing the degree of complementarity and show that the model can account for the behavior of age-specific hours and wages while generating a series of aggregate hours that is nearly as volatile as output.
Keywords: Labor Demand; Youth Employment; Business Cycles
JEL Codes: E0; E32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| young individuals (L26) | greater hours and wage volatility (J38) |
| greater hours and wage volatility (J38) | overall volatility of aggregate hours (J29) |
| capital-experience complementarity (D29) | disparity in labor sensitivity to economic shocks (J79) |
| cyclical characteristics of labor demand (J23) | fluctuations in hours worked among different age groups (J29) |
| aggregate hours volatility (C43) | volatility of output (E23) |