Employment, Hours per Worker and the Business Cycle
AbstractWe examine the impact that technology shocks have in a trivariate VAR that includes productivity, hours worked per person and the employment ratio. These last two variables have trends that make them non-stationary. There are three results of interest. First, a technology shock reduces both hours and employment if those two variables are specified in first differences, with the response of employment being stronger than the response of hours. Second, a technology shock increases both hours and employment, when those two variables are specified in levels, although in this case the response of hours worked per person is stronger. Third, considering the possibility of changes in the trend growth rate of productivity reverses the results for the VARs with data in levels only. We also present a real business cycle model capable of replicating some of the results for hours and employment.
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Bibliographic InfoPaper provided by Banco de México in its series Working Papers with number 2007-02.
Date of creation: Jan 2007
Date of revision:
Business cycles; Employment; Hours worked; Technology shocks;
Find related papers by JEL classification:
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-06-30 (All new papers)
- NEP-BEC-2007-06-30 (Business Economics)
- NEP-CBA-2007-06-30 (Central Banking)
- NEP-LAB-2007-06-30 (Labour Economics)
- NEP-MAC-2007-06-30 (Macroeconomics)
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