The Cost of Benefits, Financial Conditions, and Employment Dynamics in Recent U.S. Recoveries

52 Pages Posted: 25 Dec 2013

See all articles by Grace Weishi Gu

Grace Weishi Gu

University of California, Santa Cruz - Department of Economics

Date Written: December 23, 2013

Abstract

This paper explores how much firm-paid employee benefits and firms' financial conditions have contributed to delayed employment recoveries relative to output since 1990, using a DSGE model. Empirically, I document the underexplored pro-cyclicality of per worker benefit costs. Post-1990 period differs from before in that: (1) there have been larger increases of such quasi-fixed employment costs at recoveries; (2) tight financial conditions have also persisted longer into recent recoveries. The model generates 3-to-7-quarter delays in employment recoveries for the post-1990 period but no delay for before, consistent with data; and it produces more than 76 percent of employment volatility.

Keywords: Employment recoveries, benefit costs, extensive and intensive margins, financial conditions, enforcement constraint, DSGE model, business cycle, dynamic programming

JEL Classification: E32, J33, J21, C68, C61

Suggested Citation

Steadmon, Weishi, The Cost of Benefits, Financial Conditions, and Employment Dynamics in Recent U.S. Recoveries (December 23, 2013). Available at SSRN: https://ssrn.com/abstract=2371555 or http://dx.doi.org/10.2139/ssrn.2371555

Weishi Steadmon (Contact Author)

University of California, Santa Cruz - Department of Economics ( email )

Santa Cruz, CA 95064
United States
+1 (831) 459-4791 (Phone)

HOME PAGE: http://https://sites.google.com/site/graceweishigu/home

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
35
Abstract Views
527
PlumX Metrics