Quarterly Journal of Austrian Economics
Labor Market Effects in the Austrian Business Cycle Theory
Abstract: An open question in the Austrian business cycle theory is how labor markets across the structure of production react to broader changes in the economy. Particularly, how do labor market conditions in industries at different stages of production respond to changes in monetary policy? This paper investigates the issue by analyzing the response of employment and earnings to monetary policy shocks for ten different sectors of the economy. The results show that labor markets for each sector respond to monetary policy primarily through changes in employment rather than changes in earnings, and that there are distinct differences in the magnitude and timing of employment responses across sectors. Furthermore, these differences in sector-specific responses can be grouped according to the general stage of production that a sector is associated with.
KEYWORDS: Austrian school, business cycle, monetary policy, employment, compensation
JEL CLASSIFICATION: B53, E32, E52, J2, J3
Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.
Cite This Article
Schaffer, Matthew, "Labor Market Effects in the Austrian Business Cycle Theory," Quarterly Journal of Austrian Economics 20, no. 3 (Fall 2017): 224–54.