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Technology shocks and hours worked: Checking for robust conclusions

  • Whelan, Karl T.

This paper presents some new results on the effects of technology shocks on hours worked based on structural VAR specifications containing various measures of US productivity growth and hours. These specifications can produce different answers depending on which sector of the economy is examined, which transformation of hours worked is used, and on how many lags are chosen for the VAR. However, it is shown that the results from the stochastic trend specification used by Galí [Galí, Jordi., 1999. Technology, employment and the business cycle: do technology shocks explain aggregate fluctuations. American Economic Review, 89, 249-271] are robust across changes in data definition and lag length, while the results from the per capita hours specification of Christiano, Eichenbaum, and Vigfusson [Christiano, Lawrence., Eichenbaum, M., Vigfusson, R., 2003. What happens after a technology shock? Federal Reserve Board, International Finance Discussion Paper, 2003, p. 768] are not. These results provide support for Galí's findings that technology shocks have a negative impact effect on hours worked and that these shocks play a limited role in generating the business cycle.

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Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 31 (2009)
Issue (Month): 2 (June)
Pages: 231-239

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Handle: RePEc:eee:jmacro:v:31:y:2009:i:2:p:231-239
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622617

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  1. Susanto Basu & John Fernald & Miles Kimball, 1998. "Are technology improvements contractionary?," International Finance Discussion Papers 625, Board of Governors of the Federal Reserve System (U.S.).
  2. Matthew D. Shapiro & Mark W. Watson, 1988. "Sources of Business Cycle Fluctuations," NBER Working Papers 2589, National Bureau of Economic Research, Inc.
  3. Olivier Jean Blanchard & Danny Quah, 1988. "The Dynamic Effects of Aggregate Demand and Supply Disturbance," Working papers 497, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. Jordi Gali, 1996. "Technology, Employment, and the Business Cycle: Do Technology Shocks Explain Aggregate Fluctuations," NBER Working Papers 5721, National Bureau of Economic Research, Inc.
  5. Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992. "Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 159-178.
  6. Jordi Galí & Pau Rabanal, 2004. "Technology Shocks and Aggregate Fluctuations; How Well Does the RBC Model Fit Postwar U.S. Data?," IMF Working Papers 04/234, International Monetary Fund.
  7. Neville Francis & Michael T. Owyang & Athena T. Theodorou, 2003. "The use of long-run restrictions for the identification of technology shocks," Working Papers 2003-010, Federal Reserve Bank of St. Louis.
  8. Fernald, John G., 2007. "Trend breaks, long-run restrictions, and contractionary technology improvements," Journal of Monetary Economics, Elsevier, vol. 54(8), pages 2467-2485, November.
  9. Lawrence J. Christiano & Martin Eichenbaum & Robert Vigfusson, 2003. "What happens after a technology shock?," International Finance Discussion Papers 768, Board of Governors of the Federal Reserve System (U.S.).
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