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Models of Business Cycles: A Review Essay

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  • Francis W. Ahking
  • Stephen M. Miller

Abstract

This paper examines empirically two facets of labor force participation dynamics that imply quite different interpretations of labor market fluctuations. The first, which underlies equilibrium business cycle models, is that workers time their participation to coincide with periods of high real wages. The second, which implies the existence of involuntary unemployment during cyclical downturns, is that workers' current labor force status is heavily influenced by their work experience in the recent past. The authors' results suggest that these persistence effects are a key feature of labor force behavior, particularly for teenagers, adult women, and older men. In contrast, very little evidence could be found to support the intertemporal substitution hypothesis.

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File URL: http://college.holycross.edu/RePEc/eej/Archive/Volume14/V14N2P197_202.pdf
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Bibliographic Info

Article provided by Eastern Economic Association in its journal Eastern Economic Journal.

Volume (Year): 14 (1988)
Issue (Month): 2 (Apr-Jun)
Pages: 197-202

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Handle: RePEc:eej:eeconj:v:14:y:1988:i:2:p:197-202

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Postal: c/o Dr. Alexandre Olbrecht, The Anisfield School of Business 205, Ramapo College, 505 Ramapo Valley Road, Ramapo, New Jersey 07430, USA
Phone: (201) 684-7346
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Web page: http://www.ramapo.edu/eea/journal.html
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  1. Lovell, Michael C, 1986. "Tests of the Rational Expectations Hypothesis," American Economic Review, American Economic Association, vol. 76(1), pages 110-24, March.
  2. John F. Muth, 1985. "Properties of Some Short-run Business Forecasts," Eastern Economic Journal, Eastern Economic Association, vol. 11(3), pages 200-210, Jul-Sep.
  3. Hoffman, Dennis L. & Schlagenhauf, Don E., 1983. "Rational expectations and monetary models of exchange rate determination : An empirical examination," Journal of Monetary Economics, Elsevier, vol. 11(2), pages 247-260.
  4. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
  5. Sweeney, Richard J, 1987. "Some Macro Implications of Risk," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 19(2), pages 222-34, May.
  6. McCall, John J, 1970. "Economics of Information and Job Search," The Quarterly Journal of Economics, MIT Press, vol. 84(1), pages 113-26, February.
  7. Beveridge, Stephen & Nelson, Charles R., 1981. "A new approach to decomposition of economic time series into permanent and transitory components with particular attention to measurement of the `business cycle'," Journal of Monetary Economics, Elsevier, vol. 7(2), pages 151-174.
  8. Blinder, Alan S, 1987. "Keynes, Lucas, and Scientific Progress," American Economic Review, American Economic Association, vol. 77(2), pages 130-36, May.
  9. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
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