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Measures of Per Capita Hours and their Implications for the Technology-Hours Debate

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Author Info
Neville Francis
Valerie A. Ramey

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Abstract

Structural vector autoregressions give conflicting results on the effects of technology shocks on hours. The results depend crucially on the assumed data generating process for hours per capita. We show that the standard measure of hours per capita has significant low frequency movements that are the source of the conflicting results. HP filtered hours per capita produce results consistent with the those obtained when hours are assumed to have a unit root. We provide an alternative measure of hours per capita that adjusts for low frequency movements in government employment, schooling, and the aging of the population. When the new measure is used to determine the effect of technology shocks on hours using long-run restrictions, both the levels and the difference specifications give the same answer: hours decline in the short-run in response to a positive technology shock.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11694.

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Date of creation: Oct 2005
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Handle: RePEc:nbr:nberwo:11694

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Find related papers by JEL classification:
E2 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment
E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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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, 2004. "Why do Americans work so much more than Europeans?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Jul, pages 2-13. [Downloadable!]
    Other versions:
  2. Neville Francis & Valerie A. Ramey, 2005. "A Century of Work and Leisure," 2005 Meeting Papers 250, Society for Economic Dynamics. [Downloadable!]
    Other versions:
  3. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2005. "A critique of structural VARs using real business cycle theory," Working Papers 631, Federal Reserve Bank of Minneapolis. [Downloadable!]
    Other versions:
  4. Robert G. King & Charles I. Plosser & James H. Stock & Mark W. Watson, 1991. "Stochastic trends and economic fluctuations," Working Paper Series, Macroeconomic Issues 91-4, Federal Reserve Bank of Chicago.
    Other versions:
  5. Christopher Erceg & Luca Guerrieri & Christopher Gust, 2004. "Can long-run restrictions identify technology shocks?," International Finance Discussion Papers 792, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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  6. Pau Rabanal & Jordi Galí, 2005. "Technology Shocks and Aggregate Fluctuations: How Well Does the RBC Model Fit Postwar U.S. Data?," IMF Working Papers 04/234, International Monetary Fund. [Downloadable!]
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  7. John Fernald, 2004. "Trend Breaks, Long Run Restrictions, and the Contractionary Effects of Technology Shocks," 2004 Meeting Papers 477, Society for Economic Dynamics.
  8. Jordi Gali, 1999. "Technology, Employment, and the Business Cycle: Do Technology Shocks Explain Aggregate Fluctuations?," American Economic Review, American Economic Association, vol. 89(1), pages 249-271, March. [Downloadable!] (restricted)
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  9. Lawrence J. Christiano & Martin Eichenbaum & Robert Vigfusson, 2003. "What Happens After a Technology Shock?," NBER Working Papers 9819, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  10. Neville Francis & Michael T. Owyang & Jennifer E. Roush, 2005. "A flexible finite-horizon identification of technology shocks," International Finance Discussion Papers 832, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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  11. Burnside, Craig & Eichenbaum, Martin, 1996. "Factor-Hoarding and the Propagation of Business-Cycle Shocks," American Economic Review, American Economic Association, vol. 86(5), pages 1154-74, December. [Downloadable!] (restricted)
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  12. Matthew D. Shapiro & Mark W. Watson, 1988. "Sources of Business Cycle Fluctuations," Cowles Foundation Discussion Papers 870, Cowles Foundation, Yale University. [Downloadable!]
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  13. Neville Francis & Valerie A. Ramey, 2002. "Is the Technology-Driven Real Business Cycle Hypothesis Dead?," NBER Working Papers 8726, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  14. Cooley, Thomas F. & Dwyer, Mark, 1998. "Business cycle analysis without much theory A look at structural VARs," Journal of Econometrics, Elsevier, vol. 83(1-2), pages 57-88. [Downloadable!] (restricted)
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(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. Justiniano, Alejandro & Primiceri, Giorgio E. & Tambalotti, Andrea, 2008. "Investment Shocks and Business Cycles," CEPR Discussion Papers 6739, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  2. Arabinda Basistha, 2009. "Hours per capita and productivity: evidence from correlated unobserved components models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 24(1), pages 187-206. [Downloadable!]
  3. Holly, Sean & Petrella, Ivan, 2009. "Factor Demand Linkages, Technology Shocks and the Business Cycle," MPRA Paper 18120, University Library of Munich, Germany. [Downloadable!]
  4. Luis Alberiko Gil-Alana & Antonio Moreno, . "Technology Shocks and Hours Worked: A Fractional Integration Perspective," Faculty Working Papers 03/06, School of Economics and Business Administration, University of Navarra. [Downloadable!]
  5. Dario Caldara & Christophe Kamps, 2008. "What are the effects of fiscal shocks? A VAR-based comparative analysis," Working Paper Series 877, European Central Bank. [Downloadable!]
  6. Fabio Canova & David López-Salido & Claudio Michelacci, 2006. "On the robust effects of technology shocks on hours worked and output," Economics Working Papers 1013, Department of Economics and Business, Universitat Pompeu Fabra, revised Feb 2008. [Downloadable!]
  7. Keith Kuester, 2007. "Real price and wage rigidities in a model with mataching frictions," Working Paper Series 720, European Central Bank. [Downloadable!]
  8. Holly, S. & Petrella, I., 2008. "Factor demand linkages and the business cycle: Interpreting aggregate fluctuations as sectoral fluctuations," Cambridge Working Papers in Economics 0827, Faculty of Economics, University of Cambridge. [Downloadable!]
    Other versions:
  9. Ghent, Andra, 2006. "Comparing Models of Macroeconomic Fluctuations: How Big Are the Differences?," MPRA Paper 180, University Library of Munich, Germany. [Downloadable!]
  10. Christian Haefke & Marcus Sonntag & Thijs van Rens, 2007. "Wage Rigidity and Job Creation," Economics Working Papers 1047, Department of Economics and Business, Universitat Pompeu Fabra, revised Aug 2008. [Downloadable!]
    Other versions:
  11. Tatiana Cesaroni, 2008. "Economic integration and industrial sector fluctuations: evidence from Italy," ISAE Working Papers 106, ISAE - Institute for Studies and Economic Analyses - (Rome, ITALY). [Downloadable!]
  12. Canova, Fabio & López-Salido, J David & Michelacci, Claudio, 2008. "The Effects of Technology Shocks on Hours and Output: A Robustness Analysis," CEPR Discussion Papers 6720, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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