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Measures of Per Capita Hours and their Implications for the Technology-Hours Debate

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  • Neville Francis
  • Valerie A. Ramey

Abstract

Structural vector autoregressions give conflicting results on the effects of technology shocks on hours. The results depend crucially on the assumed data generating process for hours per capita. We show that the standard measure of hours per capita has significant low frequency movements that are the source of the conflicting results. HP filtered hours per capita produce results consistent with the those obtained when hours are assumed to have a unit root. We provide an alternative measure of hours per capita that adjusts for low frequency movements in government employment, schooling, and the aging of the population. When the new measure is used to determine the effect of technology shocks on hours using long-run restrictions, both the levels and the difference specifications give the same answer: hours decline in the short-run in response to a positive technology shock.

Suggested Citation

  • Neville Francis & Valerie A. Ramey, 2005. "Measures of Per Capita Hours and their Implications for the Technology-Hours Debate," NBER Working Papers 11694, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:11694
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    1. Valerie A. Ramey & Neville Francis, 2009. "A Century of Work and Leisure," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(2), pages 189-224, July.
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    6. Edward C. Prescott, 2004. "Why do Americans work so much more than Europeans?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Jul, pages 2-13.
    7. Jordi Gali Garreta & 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.
    8. Neville Francis & Valerie A. Ramey, 2002. "Is the Technology-Driven Real Business Cycle Hypothesis Dead?," NBER Working Papers 8726, National Bureau of Economic Research, Inc.
    9. Neville Francis & Michael T. Owyang & Jennifer E. Roush & Riccardo DiCecio, 2014. "A Flexible Finite-Horizon Alternative to Long-Run Restrictions with an Application to Technology Shocks," The Review of Economics and Statistics, MIT Press, vol. 96(4), pages 638-647, October.
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    13. 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.
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    18. Francis, Neville & Owyang, Michael T. & Roush, Jennifer E., 2005. "A Flexible Finite-Horizon Identification of Technology Shocks," International Finance Discussion Papers 832, Board of Governors of the Federal Reserve System (U.S.), revised Sep 2005.
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    JEL classification:

    • 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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