Aggregate Implications of Labor Market Distortions: The Recession of 2008-9 and Beyond / Casey B. Mulligan.

Format:

Book

Author/Creator:

Mulligan, Casey B.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w15681.

NBER working paper series no. w15681

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Aggregate Implications of Labor Market Distortions

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2010.

Summary:

The aggregate neoclassical growth model - with a labor income tax or "labor market distortion" that began growing at the end of 2007 as its only impulse - produces time series for aggregate labor usage, consumption, investment, and real GDP that closely resemble actual U.S. time series. Of particular interest is the fact that the model - with no explicit financial market - has investment fall steeply during the recession not because of any distortions with the supply of capital, but merely because labor is falling and labor is complementary with capital in the production function. Through the lens of the model, the fact the real consumption fell significantly below trend during 2008 suggests that labor usage per capita could get somewhat lower than it was at the end of 2009, and is expected to remain below pre-recession levels even after the "recovery."

Notes:

Print version record

January 2010.