Quarterly Journal of Austrian Economics

Labor Market Effects in the Austrian Business Cycle Theory


Quarterly Journal of Austrian Economics 20, no. 3 (Fall 2017)

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


Schaffer, Matthew, “Labor Market Effects in the Austrian Business Cycle Theory,” Quarterly Journal of Austrian Economics 20, no. 3 (Fall 2017): 224–54.

All Rights Reserved ©
What is the Mises Institute?

The Mises Institute is a non-profit organization that exists to promote teaching and research in the Austrian School of economics, individual freedom, honest history, and international peace, in the tradition of Ludwig von Mises and Murray N. Rothbard. 

Non-political, non-partisan, and non-PC, we advocate a radical shift in the intellectual climate, away from statism and toward a private property order. We believe that our foundational ideas are of permanent value, and oppose all efforts at compromise, sellout, and amalgamation of these ideas with fashionable political, cultural, and social doctrines inimical to their spirit.

Become a Member
Mises Institute