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Unemployment, the Variability of Hours, and the Persistence of "Disturbances": A Private Information Approach
Bruce D. Smith
International Economic Review
Vol. 30, No. 4 (Nov., 1989), pp. 921-938
Published by: Wiley for the Economics Department of the University of Pennsylvania and Institute of Social and Economic Research, Osaka University
Stable URL: http://www.jstor.org/stable/2526759
Page Count: 18
You can always find the topics here!Topics: Economic capital, Economic fluctuations, Productivity, Unemployment, Real wages, Employment, Labor markets, Economic models, Labor, Capital stocks
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A real business cycle model is developed in which the workforce is heterogeneous. Workers are privately informed about their own productive abilities. It is shown that the presence of private information creates a mechanism for enhancing the variability of hours worked, as well as "channels of persistence." Moreover, aggregate hours worked can respond strongly to variations in average productivity (real wages), even though observed responses of hours worked to real wage movements are small for all individuals in the model.
International Economic Review © 1989 Economics Department of the University of Pennsylvania