The Demand for Youth: Implications for the Hours Volatility Puzzle
NBER Working Paper No. 14697
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.
Published: The Demand for Youth: Explaining Age Differences in the Volatility of Hours, American Economic Review, December 2013, vol. 103, issue 7, 3022-3044 (with Henry Siu and Seth Pruitt).
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