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Home production meets time-to-build

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  • Paul Gomme
  • Finn Kydland
  • Peter Rupert

Abstract

An innovation in this paper is to introduce a time-to-build technology for the production of market capital into a model with home production. The paper’s main finding is that the two anomalies that have plagued all household production models—the positive correlation between business and household investment, and household investment leading business investment over the business cycle—are resolved when time-to-build is added.

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File URL: http://www.clevelandfed.org/Research/workpaper/2000/Wp0007.pdf
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Bibliographic Info

Paper provided by Federal Reserve Bank of Cleveland in its series Working Paper with number 0007R.

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Date of creation: 2000
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Handle: RePEc:fip:fedcwp:0007

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Keywords: Production (Economic theory) ; Investments;

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  1. Benhabib, Jess & Rogerson, Richard & Wright, Randall, 1991. "Homework in Macroeconomics: Household Production and Aggregate Fluctuations," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 99(6), pages 1166-87, December.
  2. Greenwood, J. & Hercowitz, Z., 1991. "The Allocation of Capital and Time Over the Business Cycles," UWO Department of Economics Working Papers, University of Western Ontario, Department of Economics 9104, University of Western Ontario, Department of Economics.
  3. Finn E. Kydland, 1993. "Business cycles and aggregate labor-market fluctuations," Working Paper 9312, Federal Reserve Bank of Cleveland.
  4. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, Econometric Society, vol. 50(6), pages 1345-70, November.
  5. Feldstein, Martin & Dicks-Mireaux, Louis & Poterba, James, 1983. "The effective tax rate and the pretax rate of return," Journal of Public Economics, Elsevier, Elsevier, vol. 21(2), pages 129-158, July.
  6. Greenwood, J. & Rogerson, R. & Wright, R., 1993. "Household Production in Real Business Cycle Thoery," RCER Working Papers 347, University of Rochester - Center for Economic Research (RCER).
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