Nonconvexities, labor hoarding, technology shocks, and procyclical productivity a structural econometric analysis

This paper develops and estimates a dynamic model of the firm that contains three methodological innovations: 1. restrictions from the firmʹs optimization problem are exploited, ormation from transversality conditions is incorporated in a tractable manner, et prices (the Brainard-Tobin Q) are integrated into an econometric framework in which there are nonconstant returns and noncompetitive markets. structural model is used to examine the persistent empirical fact of the procyclical productivity of labor, which has been of much recent concern to macroeconomists and is subject to a number of different explanations-labor hoarding, technology shocks, or a nonconvex technology. The evidence favors the latter explanation.