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Household production and taxation in the stochastic growth model

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Author Info
Ellen McGrattan
Richard Rogerson
Randall Wright

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Abstract

We estimate a dynamic general equilibrium model of the U.S. economy that includes an explicit household production sector. We use these estimates to investigate two issues. First, we analyze how well the model accounts for aggregate fluctuations. Second, we use the model to study the effects of fiscal policy. We find household production has a significant impact, and reject a nested specification in which changes in the home production technology do not matter for market variables. The model generates very different predictions for the effects of tax changes than similar models without home production.

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File URL: http://minneapolisfed.org/research/sr/sr166.pdf
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Paper provided by Federal Reserve Bank of Minneapolis in its series Staff Report with number 166.

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Date of creation: 1993
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Handle: RePEc:fip:fedmsr:166

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Keywords: Macroeconomics Production (Economic theory)

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Edward C. Prescott, 1986. "Theory ahead of business cycle measurement," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 9-22. [Downloadable!]
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  2. Nancy L. Stokey & Sergio Rebelo, 1993. "Growth Effects of Flat-Rate Taxes," NBER Working Papers 4426, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Greenwood, J. & Hercowitz, Z., 1991. "The Allocation of Capital and Time Over the Business Cycle," RCER Working Papers 268, University of Rochester - Center for Economic Research (RCER).
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  4. Benhabib, Jess & Rogerson, Richard & Wright, Randall, 1991. "Homework in Macroeconomics: Household Production and Aggregate Fluctuations," Journal of Political Economy, University of Chicago Press, vol. 99(6), pages 1166-87, December. [Downloadable!] (restricted)
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  5. Juster, F Thomas & Stafford, Frank P, 1991. "The Allocation of Time: Empirical Findings, Behavioral Models, and Problems of Measurement," Journal of Economic Literature, American Economic Association, vol. 29(2), pages 471-522, June. [Downloadable!] (restricted)
  6. Becker, Gary S, 1988. "Family Economics and Macro Behavior," American Economic Review, American Economic Association, vol. 78(1), pages 1-13, March.
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  7. McGrattan, Ellen R., 1994. "The macroeconomic effects of distortionary taxation," Journal of Monetary Economics, Elsevier, vol. 33(3), pages 573-601, June. [Downloadable!] (restricted)
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  8. Christiano, Lawrence J & Eichenbaum, Martin, 1992. "Current Real-Business-Cycle Theories and Aggregate Labor-Market Fluctuations," American Economic Review, American Economic Association, vol. 82(3), pages 430-50, June. [Downloadable!] (restricted)
  9. Joines, Douglas H, 1981. "Estimates of Effective Marginal Tax Rates on Factor Incomes," Journal of Business, University of Chicago Press, vol. 54(2), pages 191-226, April. [Downloadable!] (restricted)
  10. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November. [Downloadable!] (restricted)
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  11. Christiano, Lawrence J., 1988. "Why does inventory investment fluctuate so much?," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 247-280. [Downloadable!] (restricted)
  12. Sumru Altug, 1986. "Time to build and aggregate fluctuations: some new evidence," Working Papers 277, Federal Reserve Bank of Minneapolis. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Lars Peter Hansen & Ellen R. McGrattan & Thomas J. Sargent, 1994. "Mechanics of forming and estimating dynamic linear economies," Staff Report 182, Federal Reserve Bank of Minneapolis. [Downloadable!]
    Other versions:
  2. Matt Klaeffling, 2003. "Macroeconomic modelling of monetary policy," Working Paper Series 257, European Central Bank. [Downloadable!]
  3. Jang-Ting Guo & Kevin J. Lansing, 1994. "Tax structure, welfare, and the stability of equilibrium in a model of dynamic optimal fiscal policy," Working Paper 9410, Federal Reserve Bank of Cleveland. [Downloadable!]
  4. Tor Einarsson & Milton Marquis, 2001. "Fiscal Policy and Human Capital Accumulation in a Home Production Economy," Contributions to Macroeconomics, Berkeley Electronic Press, vol. 1(contribut), pages 1022-1022. [Downloadable!] (restricted)
  5. Jang-Ting Guo & Kevin J. Lansing, 1995. "Optimal taxation of capital income in a growth model with monopoly profits," Working Paper 9510, Federal Reserve Bank of Cleveland. [Downloadable!]
  6. Craig Burnside & Martin Eichenbaum, 1994. "Small Sample Properties of Generalized Method of Moments Based Wald Tests," NBER Technical Working Papers 0155, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Gwen Eudey & Roberto Perli, 1999. "Regime-switching in expectations over the business cycle," Working Papers 99-17, Federal Reserve Bank of Philadelphia. [Downloadable!]
  8. Jang-Ting Guo & Kevin J. Lansing, 1994. "Tax structure, optimal fiscal policy, and the business cycle," Economic Review, Federal Reserve Bank of Cleveland, issue Q IV, pages 2-14. [Downloadable!]
  9. John Y. Campbell & Sydney Ludvigson, 1998. "Elasticities of Substitution in Real Business Cycle Models with Home Production," NBER Working Papers 6763, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  10. Eric M. Leeper & Christopher A. Sims, 1994. "Toward a Modern Macroeconomic Model Usable for Policy Analysis," NBER Working Papers 4761, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  11. Jang-Ting Guo & Kevin J. Lansing, 1994. "The welfare effects of tax simplification: a general-equilibrium analysis," Working Paper 9409, Federal Reserve Bank of Cleveland. [Downloadable!]
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