Wednesday, December 24, 2008

The So-Called Participation-Hours Dichotomy

Here's a peek at some (no so pretty) Chicago Economics department politics. Coleman wrote a dissertation at Chicago in the 1980s saying that most of the business cycle was on the "extensive" or "participation margin" rather than the "intensive" or "hours margin." Professor Heckman wrote that this was one of the important lessons in labor economics.

I disagree. Participation and hours, as usually measured, are hardly conceptually distinct. Nor do my calculations for previous business cycles show the stark contrast that Coleman's did.

For this recession, hours per employee per week seem to have fallen in about the same percentage as the number of employees.

The so-called participation-hours dichotomy is much ado about almost nothing. Let's just say that labor supply slopes up and get on with it.

[The sometimes important issue of imputing wages for persons who do not work (and times not worked within person) is often confused with the supposed conceptual distinction between participation and hours. I explain here why we should not confuse these].

No comments: