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The Effects of Permanent Technology Shocks on Labor Productivity and Hours in the RBC model Author info | Abstract | Publisher info | Download info | Related research | Statistics Lindé, Jesper () (Research Department, Central Bank of Sweden)
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Recent work on the effects of permanent technology shocks argue that the basic RBC model cannot account for a negative correlation between hours worked and labor productivity. In this paper, I show that this conjecture is not necessarily correct. In the basic RBC model, I find that hours worked fall and labor productivity rises after a positive permanent technology shock once one allows for the possibility that the process for the permanent technology shock is slightly persistent in growth rates. A more serious limitation of the RBC model is its inability to generate a persistent rise in hours worked after a positive permanent technology shock along with a rise in labor productivity that are in line with what the data suggests. These results call for a reconsideration of the real and nominal frictions and policy response that need to be introduced in the basic RBC model in order to improve the model’s ability to match the data.
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Paper provided by Sveriges Riksbank (Central Bank of Sweden) in its series Working Paper Series with number
161.
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Length: 24 pages
Date of creation: 01 Apr 2004Date of revision:
Handle: RePEc:hhs:rbnkwp:0161Contact details of provider: Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden Phone: 08 - 787 00 00 Fax: 08-21 05 31 Email: Web page: http://www.riksbank.com/ More information through EDIRC
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Keywords: permanent technology shocks ; hours worked per capita ; labor productivity ; real business cycle model ; vector autoregressions ; Other versions of this item:
Find related papers by JEL classification: E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
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references 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.)
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"On the Welfare Cost of Inflation and the Recent Behavior of Money Demand ,"
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