Replication data for: Heterogeneity and Aggregation: Implications for Labor-Market Fluctuations: Comment

Principal Investigator(s): View help for Principal Investigator(s) Shuhei Takahashi

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Citation:

Takahashi, Shuhei. Replication data for: Heterogeneity and Aggregation: Implications for Labor-Market Fluctuations: Comment: 20130058_data. Nashville, TN: American Economic Association [publisher], 2014. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2019-10-11. https://doi.org/10.3886/E112762V1-70160

To view the citation for the overall project, see http://doi.org/10.3886/E112762V1.

Project Description

Summary: Chang and Kim (2007) develop an incomplete asset markets model incorporating discrete labor supply and idiosyncratic labor productivity. Their results resolve long-standing puzzles for business cycle models. Specifically, they produce a low correlation between aggregate hours worked and labor productivity (0.23) and a labor wedge with 76 percent the volatility of output. I show that these results arise from errors in their computational method. I resolve their model using a corrected method and find a strong, positive correlation between hours and productivity (0.80). Fluctuations in the labor wedge decrease to 24 percent of those in output.

Scope of Project

JEL Classification:
      D31 Personal Income, Wealth, and Their Distributions
      E32 Business Fluctuations; Cycles
      J22 Time Allocation and Labor Supply
      J24 Human Capital; Skills; Occupational Choice; Labor Productivity
      J31 Wage Level and Structure; Wage Differentials

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Published Versions

V1 [2019-10-11]

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