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Revisiting the effect of a technology shock on hours

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  • Choi, Yoonseok

Abstract

A number of studies demonstrate that a positive technology shock leads to a short-run decline in hours (employment). This paper shows that a standard flexible price model can deliver the negative response of hours to the technology shock when hyperbolic discounting is incorporated into the model. This paper also finds that the model can produce similar dynamic responses of key macroeconomic aggregates to those corroborated by previous empirical studies.

Suggested Citation

  • Choi, Yoonseok, 2017. "Revisiting the effect of a technology shock on hours," Economics Letters, Elsevier, vol. 157(C), pages 67-70.
    • Handle: RePEc:eee:ecolet:v:157:y:2017:i:c:p:67-70
    DOI: 10.1016/j.econlet.2017.05.041
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    References listed on IDEAS

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    1. Miles S. Kimball & John G. Fernald & Susanto Basu, 2006. "Are Technology Improvements Contractionary?," American Economic Review, American Economic Association, vol. 96(5), pages 1418-1448, December.
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    3. Harris, Christopher & Laibson, David, 2001. "Dynamic Choices of Hyperbolic Consumers," Econometrica, Econometric Society, vol. 69(4), pages 935-957, July.
    4. Caliendo, Frank N. & Findley, T. Scott, 2014. "Discount functions and self-control problems," Economics Letters, Elsevier, vol. 122(3), pages 416-419.
    5. Francis, Neville & Ramey, Valerie A., 2005. "Is the technology-driven real business cycle hypothesis dead? Shocks and aggregate fluctuations revisited," Journal of Monetary Economics, Elsevier, vol. 52(8), pages 1379-1399, November.
    6. Lawrence J. Christiano & Michele Boldrin & Jonas D. M. Fisher, 2001. "Habit Persistence, Asset Returns, and the Business Cycle," American Economic Review, American Economic Association, vol. 91(1), pages 149-166, March.
    7. Akerlof, George A, 1991. "Procrastination and Obedience," American Economic Review, American Economic Association, vol. 81(2), pages 1-19, May.
    8. Findley, T. Scott & Caliendo, Frank N., 2015. "Time inconsistency and retirement choice," Economics Letters, Elsevier, vol. 129(C), pages 4-8.
    9. Rebei, Nooman, 2014. "What (really) accounts for the fall in hours after a technology shock?," Journal of Economic Dynamics and Control, Elsevier, vol. 45(C), pages 330-352.
    10. Gong Liutang & Zhu Shenghao, 2006. "Does observational equivalence always hold in hyperbolic discounting models?," Economics Bulletin, AccessEcon, vol. 5(8), pages 1-8.
    11. Robert J. Barro, 1999. "Ramsey Meets Laibson in the Neoclassical Growth Model," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(4), pages 1125-1152.
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    Cited by:

    1. Yoonseok Choi, 2019. "Government spending multipliers: New results from a model of naiveté," Economics Bulletin, AccessEcon, vol. 39(3), pages 2122-2128.
    2. Yoonseok Choi, 2020. "Investment Shocks, Consumption Puzzle, And Business Cycles," Economic Inquiry, Western Economic Association International, vol. 58(3), pages 1387-1400, July.

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    More about this item

    Keywords

    Technology shock; Hours; Hyperbolic discounting; Naiveté;
    All these keywords.

    JEL classification:

    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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