Working Paper

Labor supply shifts and economic fluctuations

Abstract: We propose a new VAR identification scheme that distinguishes shifts of and movements along the labor demand schedule to identify labor-supply shocks. According to our VAR analysis of post-war U.S. data, labor-supply shifts account for about 30 percent of the variation in hours and about 15 percent of the output fluctuations at business cycle frequencies. To assess the role of labor-supply shifts in a more structural framework, estimates from a dynamic general equilibrium model with stochastic variation in home production technology are compared to those from the VAR.

Keywords: Labor supply; Economics;

Bibliographic Information

Provider: Federal Reserve Bank of Richmond

Part of Series: Working Paper

Publication Date: 2003

Number: 03-07