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Methods versus substance: measuring the effects of technology shocks on hours

Listed author(s):
  • José-Víctor Ríos-Rull
  • Frank Schorfheide
  • Cristina Fuentes-Albero
  • Raul Santaeulalia-Llopis
  • Maxym Kryshko

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 Federal Reserve Bank of Minneapolis in its series Staff Report with number 433.

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Date of creation: 2009
Handle: RePEc:fip:fedmsr:433
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