Countercyclical labor productivity: the Spanish case

Countercyclical labor productivity: the Spanish case

  • Francisco Borja Jalón Aymerich ,

Keywords:

Business cycle, labor productivity

Abstract

This article explores the role of labor regulation on the cyclical pattern of labor productivity, analyzing the Spanish case, which in a few years has gone from a procyclical to a countercyclical pattern. The description of the mechanism underlying such a phenomenon is described in this article based on the Oi model of 1962, which seems to correspond to the empirical evidence.

Our results suggest that the high rigidity of wages, together with the great flexibility in employment after the 1984 reform, is the main cause of the countercyclical pattern of Spanish labor productivity. This conclusion is aligned with numerous economic literature that highlights the crucial role of labor institutions on the cyclical pattern.

Furthermore, our analysis shows how the high increases in labor productivity during contractionary periods lack solid foundations, with the evolution of productivity being very limited in the long term.

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