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Learning-by-Doing or Habit Formation?

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  • Takashi Kano
  • Hafedh Bouakez

    ()
    (Economics HEC Montreal)

Abstract

In a recent paper, Chang, Gomes, and Schorfheide (2002) extend the standard real business cycle (RBC) model to allow for a learning-by-doing (LBD) mechanism whereby current labour supply affects future productivity. They show that this feature magnifies the propagation of shocks and improves the matching performance of the standard RBC model. In this paper, the authors show that the LBD model is nearly observationally equivalent to an RBC model with habit formation in labour (or, equivalently, in leisure). Under the same calibration of the parameters, the two models share the same equilibrium paths of output, consumption, and investment, but have different implications for hours worked. Using Bayesian techniques, the authors investigate which of the LBD and habit models fits the U.S. data best. Their results suggest that the habit specification is more strongly supported by the data.

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Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2005 Meeting Papers with number 513.

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Date of creation: 2005
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Handle: RePEc:red:sed005:513

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Keywords: Learning-by-doing; Habit formation; Bayesian analysis;

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References

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  1. Yongsung Chang & Sun-Bin Kim, 2004. "Heterogeneity and Aggregation in the Labor Market: Implications for Aggregate Preference Shifts," Macroeconomics 0402024, EconWPA.
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  15. Yongsung Chang & Joao Gomes & Frank Schorfheide, 2002. "Learning by Doing as a Propagation Mechanism," Macroeconomics 0204002, EconWPA.
  16. Robert E. Hall, 1998. "Macroeconomic Fluctuations and the Allocation of Time," NBER Working Papers 5933, National Bureau of Economic Research, Inc.
  17. Rouwenhorst, K. Geert, 1991. "Time to build and aggregate fluctuations : A reconsideration," Journal of Monetary Economics, Elsevier, vol. 27(2), pages 241-254, April.
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  19. Bover, Olympia, 1991. "Relaxing Intertemporal Separability: A Rational Habits Model of Labor Supply Estimated from Panel Data," Journal of Labor Economics, University of Chicago Press, vol. 9(1), pages 85-100, January.
  20. John Geweke, 1999. "Using Simulation Methods for Bayesian Econometric Models," Computing in Economics and Finance 1999 832, Society for Computational Economics.
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