Scandinavian Working Papers in Economics

Working Paper Series,
Sveriges Riksbank (Central Bank of Sweden)

No 198: Technology Shocks and the Labor-Input Response: Evidence from Firm-Level Data

Mikael Carlsson () and Jon Smedsaas
Additional contact information
Mikael Carlsson: Research Department, Central Bank of Sweden, Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden
Jon Smedsaas: Department of Economics, Postal: Uppsala University, PO Box 513, SE-751 20 Uppsala, Sweden

Abstract: We study the relationship between technology shocks and labor input on Swedish firm-level data using a production function approach to identify technology shocks. Taking standard steps yields a contractionary contemporaneous labor-input response in line with previous studies. This finding may, however, be driven by measurement errors in the labor-input variable. Relying on a unique feature of our data set, which contains two independently measured firm-specific labor input measures, we can evaluate the potential bias. We do not find any evidence supporting that this bias would conceal any true positive contemporaneous effect. The results thus point away from standard flexible-price models and towards models emphasizing firm-level rigidities.

Keywords: Technology Shocks; Labor Input; Business Fluctuations; Micro Data

JEL-codes: C33; D24; E32

26 pages, May 1, 2006

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