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Home Production Meets Time to Build

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  • Paul Gomme
  • Finn E. Kydland
  • Peter Rupert

Abstract

An innovation in this paper is to introduce a time-to-build technology for the production of market capital into a model with home production. Our main finding is that the two anomalies that have plagued all household production modelsthe positive correlation between business and household investment, and household investment's leading business investment over the business cycleare resolved when time to build is added.

Suggested Citation

  • Paul Gomme & Finn E. Kydland & Peter Rupert, 2001. "Home Production Meets Time to Build," Journal of Political Economy, University of Chicago Press, vol. 109(5), pages 1115-1131, October.
    • Handle: RePEc:ucp:jpolec:v:109:y:2001:i:5:p:1115-1131
    DOI: 10.1086/322829
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    References listed on IDEAS

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    1. Greenwood, Jeremy & Hercowitz, Zvi, 1991. "The Allocation of Capital and Time over the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 99(6), pages 1188-1214, December.
    2. Feldstein, Martin & Dicks-Mireaux, Louis & Poterba, James, 1983. "The effective tax rate and the pretax rate of return," Journal of Public Economics, Elsevier, vol. 21(2), pages 129-158, July.
    3. Benhabib, Jess & Rogerson, Richard & Wright, Randall, 1991. "Homework in Macroeconomics: Household Production and Aggregate Fluctuations," Journal of Political Economy, University of Chicago Press, vol. 99(6), pages 1166-1187, December.
    4. Finn E. Kydland, 1993. "Business cycles and aggregate labor-market fluctuations," Working Papers (Old Series) 9312, Federal Reserve Bank of Cleveland.
    5. Greenwood, J. & Rogerson, R. & Wright, R., 1993. "Household Production in Real Business Cycle Thoery," RCER Working Papers 347, University of Rochester - Center for Economic Research (RCER).
    6. Hornstein, Andreas & Praschnik, Jack, 1997. "Intermediate inputs and sectoral comovement in the business cycle," Journal of Monetary Economics, Elsevier, vol. 40(3), pages 573-595, December.
    7. Baxter, Marianne, 1996. "Are Consumer Durables Important for Business Cycles?," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 147-155, February.
    8. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-1370, November.
    9. Fisher, Jonas D. M., 1997. "Relative prices, complementarities and comovement among components of aggregate expenditures," Journal of Monetary Economics, Elsevier, vol. 39(3), pages 449-474, August.
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