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Labor Hoarding and the Business Cycle
Bruce C. Horning
International Economic Review
Vol. 35, No. 1 (Feb., 1994), pp. 87-100
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/2527091
Page Count: 14
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The puzzle of procyclical labor productivity occupies an important position in the debate over Real Business Cycle Theory. Real Business Cycle proponents attribute it to procyclical technology shocks, opponents to "labor hoarding"-retention during recessions of workers not needed for current production, thus downwardly biasing productivity measurements. This paper uses a model featuring heterogeneous industries to illustrate that the conventional presumption of counter-cyclical aggregate labor hoarding generating procyclical productivity measurements is not necessarily well grounded in theory.
International Economic Review © 1994 Economics Department of the University of Pennsylvania