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Methods versus Substance: Measuring the Effects of Technology Shocks on Hours

  • Fuentes-Albero, Cristina
  • Kryshko, Maxym
  • Ríos-Rull, José-Víctor
  • Santaeulàlia-Llopis, Raül
  • Schorfheide, Frank

In this paper, we employ both calibration and modern (Bayesian) estimation methods to assess the role of neutral and investment-specific technology shocks in generating fluctuations in hours. Using a neoclassical stochastic growth model, we show how answers are shaped by the identification strategies and not by the statistical approaches. The crucial parameter is the labor supply elasticity. Both a calibration procedure that uses modern assessments of the Frisch elasticity and the estimation procedures result in technology shocks accounting for 2% to 9% of the variation in hours worked in the data. We infer that we should be talking more about identification and less about the choice of particular quantitative approaches.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7474.

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Date of creation: Sep 2009
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Handle: RePEc:cpr:ceprdp:7474
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