The Demand for Youth: Implications for the Hours Volatility Puzzle

Nir Jaimovich, Seth Pruitt, Henry E. Siu

NBER Working Paper No. 14697
Issued in January 2009
NBER Program(s):   EFG

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.

(415 K)

This paper is available as PDF (415 K) or via email.

Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX