02099cas a2200265 a 4500 AALejournalIMF013525 230101c9999 xx r poo 0 0eng d 5.00 USD 9781484331026 1018-5941 BD-DhAAL BD-DhAAL De Michelis, Andrea. Productivity or Employment : Is It a Choice? / Andrea De Michelis, Marcello Estevao, Beth Anne Wilson. Washington, D.C. : International Monetary Fund, 2013. 1 online resource (31 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students Traditionally, shocks to total factor productivity (TFP) are considered exogenous and the employment response depends on their effect on aggregate demand. We raise the possibility that in response to labor supply shocks firms adjust efficiency, rendering TFP endogenous to firms' production decisions. We present robust cross-country evidence of a strong negative correlation between growth in TFP and labor inputs over the medium to long run. In addition, when using instruments to capture changes in hours worked that are independent of TFP shocks, we find that cross-country increases in labor input cause reductions in TFP growth. These results have important policy implications, including that low productivity growth in some countries may partly be a side effect of strong labor market performance. By the same token, countries facing a declining workforce, say, because of aging, may see accelerating TFP as firms find better ways of employing workers. Mode of access: Internet Estevao, Marcello. Wilson, Beth Anne. IMF Working Papers; Working Paper ; No. 2013/097 Full text available on IMF http://elibrary.imf.org/view/journals/001/2013/097/001.2013.issue-097-en.xml IMF e-Library