The Demand for Youth: Implications for the Hours Volatility Puzzle

41 Pages Posted: 31 Jan 2009 Last revised: 29 Aug 2022

See all articles by Nir Jaimovich

Nir Jaimovich

University of Zurich

Seth Pruitt

Arizona State University (ASU) - Finance Department

Henry Siu

University of British Columbia (UBC) - Vancouver School of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: January 2009

Abstract

The employment and hours worked of young individuals fluctuate much more over the business cycle than those of prime-aged individuals. Understanding the mechanism underlying this observation is key to explaining the volatility of aggregate hours over the cycle. We argue that the joint behavior of age-specific hours and wages in the U.S. data point to differences in the cyclical characteristics of labor demand. To articulate this view, we consider a production technology displaying capital-experience complementarity. We estimate the key parameters governing the degree of complementarity and show that the model can account for the behavior of age-specific hours and wages while generating a series of aggregate hours that is nearly as volatile as output.

Suggested Citation

Jaimovich, Nir and Pruitt, Seth and Siu, Henry, The Demand for Youth: Implications for the Hours Volatility Puzzle (January 2009). NBER Working Paper No. w14697, Available at SSRN: https://ssrn.com/abstract=1335722

Nir Jaimovich (Contact Author)

University of Zurich ( email )

Seth Pruitt

Arizona State University (ASU) - Finance Department ( email )

W. P. Carey School of Business
PO Box 873906
Tempe, AZ 85287-3906
United States

Henry Siu

University of British Columbia (UBC) - Vancouver School of Economics ( email )

6000 Iona Dr
Vancouver, BC V6T 1L4
Canada