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Labor Hoarding and the Business Cycle

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  • Burnside, Craig
  • Eichenbaum, Martin
  • Rebelo, Sergio

Abstract

This paper investigates the sensitivity of Solow residual based measures of technology shocks to labor-hoarding behavior. Using a structural model of labor hoarding and the identifying restriction that innovations to technology shocks are orthogonal to innovations in government consumption, the authors estimate the fraction of the variability of the Solow residual that is due to technology shocks. Their results support the view that a significant proportion of movements in the Solow residual are artifa cts of labor-hoarding behavior. Specifically, the authors estimate that the variance of innovations to technology is roughly 50 percent less than that implied by standard real business cycle models. Copyright 1993 by University of Chicago Press.

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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 101 (1993)
Issue (Month): 2 (April)
Pages: 245-73

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Handle: RePEc:ucp:jpolec:v:101:y:1993:i:2:p:245-73

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References

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  1. Robert J. Gordon, 1980. "The "End-of-Expansion" Phenomenon in Short-run Productivity Behavior," NBER Working Papers 0427, National Bureau of Economic Research, Inc.
  2. Lawrence J. Christiano & Martin Eichenbaum, 1990. "Current real business cycle theories and aggregate labor market fluctuations," Discussion Paper / Institute for Empirical Macroeconomics 24, Federal Reserve Bank of Minneapolis.
  3. Prescott, Edward C., 1986. "Theory ahead of business-cycle measurement," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 25(1), pages 11-44, January.
  4. Rogerson, Richard, 1988. "Indivisible labor, lotteries and equilibrium," Journal of Monetary Economics, Elsevier, vol. 21(1), pages 3-16, January.
  5. King, R.G. & Baxter, M., 1990. "Fiscal Policy In General Equilibrium," RCER Working Papers 244, University of Rochester - Center for Economic Research (RCER).
  6. Evans, Charles L., 1992. "Productivity shocks and real business cycles," Journal of Monetary Economics, Elsevier, vol. 29(2), pages 191-208, April.
  7. Lawrence J. Christiano, 1987. "Why is consumption less volatile than income?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 2-20.
  8. Julio J. Rotemberg & Lawrence H. Summers, 1988. "Labor Hoarding, Inflexible Prices, and Procyclical Productivity," NBER Working Papers 2591, National Bureau of Economic Research, Inc.
  9. Robert E. Hall, 1986. "The Relation Between Price and Marginal Cost in U.S. Industry," NBER Working Papers 1785, National Bureau of Economic Research, Inc.
  10. Martin S. Eichenbaum & Lars Peter Hansen, 1987. "Estimating Models with Intertemporal Substitution Using Aggregate Time Series Data," NBER Working Papers 2181, National Bureau of Economic Research, Inc.
  11. Jess Benhabib & Randall Wright & Richard Rogerson, 1990. "Homework in Macoreconomics I: Basic Theory (Part I of II)," NBER Working Papers 3344, National Bureau of Economic Research, Inc.
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  1. Werktijdverkorting
    by Thijs in eco.nomie.nl on 2008-11-13 09:44:19

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As found on the RePEc Biblio, the curated bibliography for Economics:
  1. > Macroeconomics > Economic Fluctuations > Real Business Cycle Theory
  2. > Macroeconomics > Economic Fluctuations > Real Business Cycle Theory > Labor in RBC models
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