Revisiting the “Productivity-Hours Puzzle” in the RBC Paradigm: The Role of Investment Adjustment Costs
Conventional RBC models have been heavily criticized for their inability to generate the estimated negative correlations of hours and productivity in response to technology shocks ('productivity-hours puzzle'). In this paper we show that by just enhancing the standard frame- work with investment adjustment costs can resolve the 'productivity-hours puzzle'.
|Date of creation:||Feb 2012|
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