From Lee E. Ohanian’s “Understanding Economic Crises: The Great Depression and the 2008 Recession”
” A common distortion in many US and other recessions is a productivity distortion… But the 2008 US recession has no distortion in productivity or any other distortions with the exception of a very large deviation in the standard household equilibrium condition that equates the marginal product of labour with the marginal rate of substitution between consumption and leisure.”
“This suggests that if the recession is primarily the consequence of the financial crisis, then it appears to be operating through labour market channels that distort the relationship between the **marginal rate of substitution and the marginal product of labour.** “
Found in Economics.