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Persistence

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  • Yongsung Chang

    (University of Pennsylvania)

  • Joao Gomes

    (University of Pennsylvania)

  • Frank Schorfheide

    (University of Pennsylvania)

Abstract

To generate persistence we augment the standard real business cycle (RBC) model with a ``learning by doing'' (LBD) mechanism, where current labor supply affects workers' future labor productivity. Our econometric analysis shows that the LBD model fits aggregate data much better than the standard RBC model. We calculate posterior odds for the structural models and formally show that the LBD model more closely mimics the autocorrelation and impulse response patterns that we found in a bivariate VAR analysis.

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Bibliographic Info

Paper provided by Econometric Society in its series Econometric Society World Congress 2000 Contributed Papers with number 1632.

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Date of creation: 01 Aug 2000
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Handle: RePEc:ecm:wc2000:1632

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  1. Marianne Baxter & Robert G. King, 1991. "Productive externalities and business cycles," Discussion Paper / Institute for Empirical Macroeconomics, Federal Reserve Bank of Minneapolis 53, Federal Reserve Bank of Minneapolis.
  2. Timothy Cogley & James M. Nason, 1993. "Output dynamics in real business cycle models," Working Papers in Applied Economic Theory, Federal Reserve Bank of San Francisco 93-10, Federal Reserve Bank of San Francisco.
  3. Louis S. Jacobson & Robert J. LaLonde & Daniel G. Sullivan, 1992. "Earnings losses of displaced workers," Working Paper Series, Macroeconomic Issues, Federal Reserve Bank of Chicago 92-28, Federal Reserve Bank of Chicago.
  4. Michael J. Pries, 2004. "Persistence of Employment Fluctuations: A Model of Recurring Job Loss," Review of Economic Studies, Oxford University Press, vol. 71(1), pages 193-215.
  5. Thomas Doan & Robert B. Litterman & Christopher A. Sims, 1986. "Forecasting and conditional projection using realistic prior distribution," Staff Report, Federal Reserve Bank of Minneapolis 93, Federal Reserve Bank of Minneapolis.
  6. Rotemberg, Julio J & Woodford, Michael, 1996. "Real-Business-Cycle Models and the Forecastable Movements in Output, Hours, and Consumption," American Economic Review, American Economic Association, American Economic Association, vol. 86(1), pages 71-89, March.
  7. Chang, Yongsung & Kwark, Noh-Sun, 2001. "Decomposition of hours based on extensive and intensive margins of labor," Economics Letters, Elsevier, Elsevier, vol. 72(3), pages 361-367, September.
  8. Wouter J. den Haan & Garey Ramey & Joel Watson, 1997. "Job Destruction and Propagation of Shocks," NBER Working Papers 6275, National Bureau of Economic Research, Inc.
  9. Cochrane, John H, 1988. "How Big Is the Random Walk in GNP?," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 96(5), pages 893-920, October.
  10. R Cooper & Alok Johri, 2000. "Learning by Doing and Aggregate Fluctuations," Department of Economics Working Papers 2000-02, McMaster University.
  11. Cochrane, John H, 1994. "Permanent and Transitory Components of GNP and Stock Prices," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 109(1), pages 241-65, February.
  12. Hall, Robert E, 1997. "Macroeconomic Fluctuations and the Allocation of Time," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 15(1), pages S223-50, January.
  13. Topel, Robert H, 1991. "Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 99(1), pages 145-76, February.
  14. Perli, Roberto & Sakellaris, Plutarchos, 1998. "Human capital formation and business cycle persistence," Journal of Monetary Economics, Elsevier, Elsevier, vol. 42(1), pages 67-92, June.
  15. Ruhm, Christopher J, 1991. "Are Workers Permanently Scarred by Job Displacements?," American Economic Review, American Economic Association, American Economic Association, vol. 81(1), pages 319-24, March.
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Cited by:
  1. Wendt, Minh & Kinsey, Jean D., 2009. "Childhood Overweight and School Outcomes," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin, Agricultural and Applied Economics Association 49347, Agricultural and Applied Economics Association.
  2. Kevin L. Reffett & Frank Schorfheide, 2000. "Evaluating Asset Pricing Implications of DSGE Models," Econometric Society World Congress 2000 Contributed Papers, Econometric Society 1630, Econometric Society.
  3. Damien Besancenot & Habib Dogguy, 2011. "Paradigm Shift," CEPN Working Papers, HAL halshs-00590527, HAL.

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