TY  - JOUR
AU  - Baily,Martin Neil
AU  - Bartelsman,Eric J.
AU  - Haltiwanger,John
TI  - Labor Productivity: Structural Change and Cyclical Dynamics
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 5503
PY  - 1996
Y2  - March 1996
UR  - http://www.nber.org/papers/w5503
L1  - http://www.nber.org/papers/w5503.pdf
N1  - Author contact info:
Martin Neil Baily
8500 Freyman Drive
Chevey Chase, MD 20815
E-Mail: mbaily@brookings.edu

Eric Bartlesman
Vrije Universiteit Amsterdam
Tinbergen Institute
E-Mail: ebartelsman@alum.mit.edu

John C. Haltiwanger
Department of Economics
University of Maryland
College Park, MD 20742
Tel: 301/405-3504
Fax: 301/405-3542
E-Mail: haltiwan@econ.umd.edu
AB  - A longstanding puzzle of empirical economics is that average labor productivity declines during recessions and increases during booms.  This paper provides a framework to assess the empirical importance of competing hypotheses for explaining the observed procyclicality.  For each competing hypothesis we derive the implications for cyclical productivity conditional on expectations of future demand and supply conditions.  The novelty of the paper is that we exploit the tremendous heterogeneity in long-run structural changes across individual plants to identify the short-run sources of procyclical productivity.  Our findings favor an adjustment cost model which involves a productivity penalty for downsizing as the largest source of procyclical labor productivity.
ER  -