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Substitution over Time in Work and Consumption

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  • Robert E. Hall

Abstract

Sir John Hick's Value and Capital provided the theoretical foundation for an important element of modern macroeconomics. Intertemporal substitution - deferral or acceleration of economic activity in response to the real interest rate and other incentives - is the mechanism generally relied upon in equilibrium theories of macroeconomics to explain the irregular evolution of the economy over time. Even theorists who question the pure market-clearing paradigm are concerned with intertemporal substitution in measuring deadweight burden of fluctuations. This paper surveys recent empirical evidence on intertemporal substitution with regard to the type of fluctuations model introduced in Value and Capital.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2789.

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Date of creation: Dec 1988
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Publication status: published as "Substitution over Time in Consumption and Work." From Value and Capital: Fifty Years Later, edited by Lionel W. McKenzie and Stefano Zamagni, pp. 2 39-267. London: Macmillan Press, 1991.
Handle: RePEc:nbr:nberwo:2789

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  1. Robert E. Hall, 1981. "Intertemporal Substitution in Consumption," NBER Working Papers 0720, National Bureau of Economic Research, Inc.
  2. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
  3. West, Kenneth D, 1986. "A Variance Bounds Test of the Linear Quadratic Inventory Model," Journal of Political Economy, University of Chicago Press, vol. 94(2), pages 374-401, April.
  4. Breeden, Douglas T., 1979. "An intertemporal asset pricing model with stochastic consumption and investment opportunities," Journal of Financial Economics, Elsevier, vol. 7(3), pages 265-296, September.
  5. Hansen, Lars Peter & Singleton, Kenneth J, 1983. "Stochastic Consumption, Risk Aversion, and the Temporal Behavior of Asset Returns," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 249-65, April.
  6. Killingsworth, Mark R. & Heckman, James J., 1987. "Female labor supply: A survey," Handbook of Labor Economics, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 1, chapter 2, pages 103-204 Elsevier.
  7. Lawrence H. Summers, 1986. "Some skeptical observations on real business cycle theory," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 23-27.
  8. Ramey, Valerie A. & West, Kenneth D., 1999. "Inventories," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 13, pages 863-923 Elsevier.
  9. Epstein, Larry G & Zin, Stanley E, 1989. "Substitution, Risk Aversion, and the Temporal Behavior of Consumption and Asset Returns: A Theoretical Framework," Econometrica, Econometric Society, vol. 57(4), pages 937-69, July.
  10. Robert B. Barsky & Jeffrey A. Miron, 1988. "The Seasonal Cycle and the Business Cycle," NBER Working Papers 2688, National Bureau of Economic Research, Inc.
  11. Edward C. Prescott, 1986. "Theory ahead of business cycle measurement," Staff Report 102, Federal Reserve Bank of Minneapolis.
  12. N. Gregory Mankiw & Julio J. Rotemberg & Lawrence H. Summers, 1982. "Intertemporal Substitution in Macroeconomics," NBER Working Papers 0898, National Bureau of Economic Research, Inc.
  13. Kreps, David M & Porteus, Evan L, 1978. "Temporal Resolution of Uncertainty and Dynamic Choice Theory," Econometrica, Econometric Society, vol. 46(1), pages 185-200, January.
  14. Bils, Mark, 1987. "The Cyclical Behavior of Marginal Cost and Price," American Economic Review, American Economic Association, vol. 77(5), pages 838-55, December.
  15. Barro, Robert J, 1981. "Output Effects of Government Purchases," Journal of Political Economy, University of Chicago Press, vol. 89(6), pages 1086-1121, December.
  16. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
  17. John M. Abowd & Orley C. Ashenfelter, 1981. "Anticipated Unemployment, Temporary Layoffs, and Compensating Wage Differentials," NBER Chapters, in: Studies in Labor Markets, pages 141-186 National Bureau of Economic Research, Inc.
  18. Robert E. Hall, 1980. "Employment Fluctuations and Wage Rigidity," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 11(1, Tenth ), pages 91-142.
  19. Lucas, Robert E, Jr & Rapping, Leonard A, 1969. "Real Wages, Employment, and Inflation," Journal of Political Economy, University of Chicago Press, vol. 77(5), pages 721-54, Sept./Oct.
  20. Robert E. Hall, 1987. "Consumption," NBER Working Papers 2265, National Bureau of Economic Research, Inc.
  21. MaCurdy, Thomas E, 1981. "An Empirical Model of Labor Supply in a Life-Cycle Setting," Journal of Political Economy, University of Chicago Press, vol. 89(6), pages 1059-85, December.
  22. Larry G. Epstein & Stanley E. Zin, 1987. "Substitution, Risk Aversion and the Temporal Behaviour of Consumption and Asset Returns I: A Theoretical Framework," Working Papers 699, Queen's University, Department of Economics.
  23. Rees, Albert, 1970. "On Equilibrium in Labor Markets," Journal of Political Economy, University of Chicago Press, vol. 78(2), pages 306-10, March-Apr.
  24. Pencavel, John, 1987. "Labor supply of men: A survey," Handbook of Labor Economics, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 1, chapter 1, pages 3-102 Elsevier.
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Cited by:
  1. R. Blundell & M. Browning & C. Mehgir, 1989. "A Microeconomic Model of Intertemporal Substitution and Consumer Demand," Department of Economics Working Papers 1989-02, McMaster University.
  2. Bianconi, Marcelo, 1995. "Fiscal policy in a simple two-country dynamic model," Journal of Economic Dynamics and Control, Elsevier, vol. 19(1-2), pages 395-419.

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