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

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  • Neville Francis
  • Valerie A. Ramey

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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Publication status: published as Neville Francis & Valerie A. Ramey, 2009. "Measures of per Capita Hours and Their Implications for the Technology-Hours Debate," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(6), pages 1071-1097, 09.
Handle: RePEc:nbr:nberwo:11694

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  1. Edward C. Prescott, 2003. "Why do Americans work so much more than Europeans?," Staff Report, Federal Reserve Bank of Minneapolis 321, Federal Reserve Bank of Minneapolis.
  2. Jordi Galí & Pau Rabanal, 2004. "Technology Shocks and Aggregate Fluctuations," IMF Working Papers 04/234, International Monetary Fund.
  3. Matthew Shapiro & Mark Watson, 1988. "Sources of Business Cycles Fluctuations," NBER Chapters, in: NBER Macroeconomics Annual 1988, Volume 3, pages 111-156 National Bureau of Economic Research, Inc.
  4. Christopher J. Erceg & Luca Guerrieri & Christopher Gust, 2005. "Can Long-Run Restrictions Identify Technology Shocks?," Journal of the European Economic Association, MIT Press, MIT Press, vol. 3(6), pages 1237-1278, December.
  5. Baxter, Marianne & King, Robert G, 1993. "Fiscal Policy in General Equilibrium," American Economic Review, American Economic Association, American Economic Association, vol. 83(3), pages 315-34, June.
  6. Craig Burnside & Martin Eichenbaum, 1994. "Factor Hoarding and the Propagation of Business Cycles Shocks," NBER Working Papers 4675, National Bureau of Economic Research, Inc.
  7. Lawrence J. Christiano & Martin Eichenbaum & Robert Vigfusson, 2003. "What Happens After a Technology Shock?," NBER Working Papers 9819, National Bureau of Economic Research, Inc.
  8. Neville Francis & Valerie A. Ramey, 2005. "A Century of Work and Leisure," 2005 Meeting Papers, Society for Economic Dynamics 250, Society for Economic Dynamics.
  9. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2004. "A Critique of Structural VARs Using Real Business Cycle Theory," Levine's Bibliography 122247000000000518, UCLA Department of Economics.
  10. Gali, J., 1996. "Technology, Employment, and the Business Cycle: Do Technology Shocks Explain Aggregate Fluctuations?," Working Papers, C.V. Starr Center for Applied Economics, New York University 96-28, C.V. Starr Center for Applied Economics, New York University.
  11. Kent D. Wall, 1976. "Interequation Constraint and the Specification of Dynamic Structure," NBER Working Papers 0119, National Bureau of Economic Research, Inc.
  12. Robert G. King & Charles I. Plosser & James H. Stock & Mark W. Watson, 1987. "Stochastic Trends and Economic Fluctuations," NBER Working Papers 2229, National Bureau of Economic Research, Inc.
  13. Neville Francis & Michael T. Owyang & Jennifer E. Roush, 2005. "A flexible finite-horizon identification of technology shocks," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 832, Board of Governors of the Federal Reserve System (U.S.).
  14. Cooley, Thomas F. & Dwyer, Mark, 1998. "Business cycle analysis without much theory A look at structural VARs," Journal of Econometrics, Elsevier, Elsevier, vol. 83(1-2), pages 57-88.
  15. John Fernald, 2004. "Trend Breaks, Long Run Restrictions, and the Contractionary Effects of Technology Shocks," 2004 Meeting Papers 477, Society for Economic Dynamics.
  16. 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.
  17. Neville Francis & Michael T. Owyang & Jennifer E. Roush & Riccardo DiCecio, 2010. "A flexible finite-horizon alternative to long-run restrictions with an application to technology shock," Working Papers, Federal Reserve Bank of St. Louis 2005-024, Federal Reserve Bank of St. Louis.
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