Journal Article Wages and Employment under Uncertain Demand Get access Martin Neil Baily Martin Neil Baily Yale University Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 41, Issue 1, January 1974, Pages 37–50, https://doi.org/10.2307/2296397 Published: 01 January 1974

Journal Article Productivity Growth and Materials Use in U. S. Manufacturing Get access Martin Neil Baily Martin Neil Baily Brookings Institution Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 101, Issue 1, February 1986, Pages 185–195, https://doi.org/10.2307/1884648 Published: 01 February 1986

[This paper develops a theory of the firm's demand for labor when workers, at the time they are hired, know that they may later be laid off. The derived behavior shows how the firm, in response to price falls of increasing severity, will first reduce hours of work. After a minimum work week has been reached layoffs start. The point at which this occurs depends upon the income workers expect to receive if they are laid off. Since unemployment insurance (UI) benefits are an important determinant of this income level, they influence the number of layoffs. Given the absence of an effective incentive tax in practice, we would predict that the present UI system encourages layoffs. An effective, incentive tax could stop this encouragement. Two possible wage strategies are explored, both of which are consistent with the basic layoff and hours model. The flexible wage policy has the advantage of giving no incentive to the firm to default on the (privately) efficient layoff rules derived earlier, but seems to be inconsistent with observed short-run wage policy. The fixed wage policy has its strength and weakness the other way around.]

Examines at the microeconomic level the assumption that the rate of change of the labor supply to a firm depends on the wage paid by the firm. Concept of dynamic monopsony; Response in terms of the optimal wage path to different product prices; Properties of the optimal path. (From Ebsco)

The author reviews the latest information on productivity and the alternative explanations of the slowdown, which he concludes was partially due to a decline in innovation and work effort and mostly due the post 1973 energy price increases. Identical policy responses to the worldwide inflation were also a reason why so many countries experienced slow growth at the same time, as cyclical productivity declines were added to the structural decline. There are signs that productivity growth is recovering, which gives credence to the view that the temporary shocks of the 1970s were the culprit.

A longstanding issue in empirical economics is the behavior of average labor productivity over the business cycle. This paper provides new insights into the cyclicality of aggregate labor productivity by examining the cyclical behavior of productivity at the plant level as well as the role of reallocation across plants over the cycle. We find that plant-level productivity is even more procyclical than aggregate productivity, because short-run reallocation yields a countercyclical contribution to labor productivity. At the plant level, we find that cyclicality of productivity varies systematically with long-run employment growth. Over the course of the cycle, plants that are long-run downsizers exhibit significantly greater procyclicality of productivity than do long-run upsizers. When we control for the direction of a cyclical shock, we find that the fall in productivity from an adverse cyclical shock for long-run downsizers is significantly larger in magnitude than is the fall in productivity from an equivalent adverse cyclical shock for long-run upsizers. We argue that these findings raise questions about one of the most popular explanations of procyclical productivity: changing factor utilization over the cycle.