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Cyclical Implications of the Variable Utilization of Physical and Human Capital

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Author Info
David N. DeJong (Univ of Pittsburgh)
Beth F. Ingram (Univ of Iowa)
Yi Wen (Hong Kong Univ of Sci and Tech)
Charles H. Whiteman (Univ of Iowa)

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Abstract

We develop a business cycle model in which consumption goods, physical capital, and human capital are produced in separate sectors. An important feature of the model is that human and machine inputs in the production process are treated symmetrically: each has both a stock and flow component. The model's representative agent is permitted to use the stocks (physical and human capital) at less than capacity by varying the utilization rate of capital and the hours of labor devoted to production. Utilizing physical capital at less than capacity slows depreciation; utilizing human capital at less than capacity frees time that may be devoted to study, resulting in more rapid human capital accumulation. We find that the model nicely characterizes cyclical properties of U.S. data on output, investment, consumption and employment, particularly at business-cycle frequencies.

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Paper provided by EconWPA in its series Macroeconomics with number 9609004.

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Length: 19 pages
Date of creation: 16 Sep 1996
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Handle: RePEc:wpa:wuwpma:9609004

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E - Macroeconomics and Monetary Economics

References listed on IDEAS
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. Rotemberg, Julio J & Woodford, Michael, 1996. "Real-Business-Cycle Models and the Forecastable Movements in Output, Hours, and Consumption," American Economic Review, American Economic Association, vol. 86(1), pages 71-89, March.
  2. Perli, Roberto & Sakellaris, Plutarchos, 1998. "Human capital formation and business cycle persistence," Journal of Monetary Economics, Elsevier, vol. 42(1), pages 67-92, June. [Downloadable!] (restricted)
  3. Jacob Mincer, 1989. "Job Training: Costs, Returns, and Wage Profiles," NBER Working Papers 3208, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Mary G. Finn, 1991. "Energy price shocks, capacity utilization and business cycle fluctuations," Discussion Paper / Institute for Empirical Macroeconomics 50, Federal Reserve Bank of Minneapolis. [Downloadable!]
  5. Greenwood, Jeremy & Hercowitz, Zvi & Huffman, Gregory W, 1988. "Investment, Capacity Utilization, and the Real Business Cycle," American Economic Review, American Economic Association, vol. 78(3), pages 402-17, June. [Downloadable!] (restricted)
  6. Bils, Mark & Cho, Jang-Ok, 1994. "Cyclical factor utilization," Journal of Monetary Economics, Elsevier, vol. 33(2), pages 319-354, April. [Downloadable!] (restricted)
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  7. Cogley, Timothy & Nason, James M, 1995. "Output Dynamics in Real-Business-Cycle Models," American Economic Review, American Economic Association, vol. 85(3), pages 492-511, June. [Downloadable!] (restricted)
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  8. 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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  9. Mincer, J., 1989. "Job Training: Costs, Returns, And Wage Profiles," Discussion Papers 1989_39, Columbia University, Department of Economics.
  10. David N. DeJong & Beth F. Ingram & Charles H. Whiteman, 2000. "Keynesian impulses versus Solow residuals: identifying sources of business cycle fluctuations," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 15(3), pages 311-329. [Downloadable!]
  11. Jeremy Greenwood & Zvi Hercowitz & Per Krusell, 1992. "Macroeconomic implications of investment-specific technological change," Discussion Paper / Institute for Empirical Macroeconomics 76, Federal Reserve Bank of Minneapolis. [Downloadable!]
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  12. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July. [Downloadable!] (restricted)
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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.)

  1. Alison Butler & Michael R. Pakko, 1998. "R&D spending and cyclical fluctuations: putting the "technology" in technology shocks," Working Papers 1998-020, Federal Reserve Bank of St. Louis. [Downloadable!]
  2. Christopher Otrok, 2000. "On Measuring the Welfare Cost of Business Cycles," Econometric Society World Congress 2000 Contributed Papers 1094, Econometric Society. [Downloadable!]
    Other versions:
  3. Benhabib, Jess & Perli, Roberto & Sakellaris, Plutarchos, 1997. "Persistence of Business Cycles in Multisector RBC Models," Working Papers 97-19, C.V. Starr Center for Applied Economics, New York University. [Downloadable!]
  4. Beatriz Rumbos & Leonardo Auernheimer, 2001. "Endogenous capital utilization in a neoclassical growth model," Atlantic Economic Journal, International Atlantic Economic Society, vol. 29(2), pages 121-134, June. [Downloadable!] (restricted)
  5. Collard, Fabrice & Kollintzas, Tryphon, 2000. "Maintenance, Utilization, and Depreciation along the Business Cycle," CEPR Discussion Papers 2477, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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