The Division of Temporary and Permanent Employment and Business Cycle Fluctuations

Chen, Kuan-Jen and Lai, Ching-Chong and Lai, Ting-Wei (2016): The Division of Temporary and Permanent Employment and Business Cycle Fluctuations.

Abstract

This paper investigates the fluctuations in temporary relative to aggregate employment over the business cycle, as well as the underlying driving forces. We develop a dynamic general equilibrium model to investigate the following stylized facts: (i) temporary employment is more volatile than permanent employment, (ii) the share of temporary employment (the ratio of temporary to aggregate employment) exhibits strong pro-cyclicality, (iii) permanent employment lags by two quarters on average, and (iv) the correlation between temporary employment and output is stronger than that involving the permanent counterpart. The quantitative analysis suggests that the proposed channels explain the main facts very well and the model provides a possible prediction based on the counter-factual exercises.

• Item Type: MPRA Paper
• Language: English
• Keywords: Pro-cyclicality of Temporary Employment; Lagged Behavior of Permanent Employment; Labor Productivity; Business Cycles
• Subjects: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E24 - Employment ; Unemployment ; Wages ; Intergenerational Income Distribution ; Aggregate Human Capital ; Aggregate Labor Productivity; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles

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