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Why Did U.S. Market Hours Boom in the 1990s?

  • Ellen R. McGrattan
  • Eduard C. Prescott


    (Federal Reserve Bank of MInneapolis)

During the 1990s, market hours in the United States rose dramatically. The rise in hours occurred as gross domestic product (GDP) per hour was declining relative to its historical trend, an occurrence that makes this boom unique, at least for the postwar U.S. economy. We find that expensed plus sweat investment was large during this period and critical for understanding the movements in hours and productivity. Expensed investments are expenditures that increase future profits but, by national accounting rules, are treated as operating expenses rather than capital expenditures. Sweat investments are uncompensated hours in a business made with the expectation of realizing capital gains when the business goes public or is sold. Incorporating expensed and sweat equity into an otherwise standard business cycle model, we find that there was rapid technological progress during the 1990s, causing a boom in market hours and actual productivity.H

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Paper provided by Society for Economic Dynamics in its series 2006 Meeting Papers with number 192.

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Date of creation: 03 Dec 2006
Date of revision:
Handle: RePEc:red:sed006:192
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Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

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  1. Jay Ritter & Ivo Welch, 2002. "A Review of IPO Activity, Pricing and Allocations," Yale School of Management Working Papers ysm258, Yale School of Management, revised 01 Apr 2002.
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  3. Ellen R. McGrattan, 2006. "Real business cycles," Staff Report 370, Federal Reserve Bank of Minneapolis.
  4. Ellen R. McGrattan & Edward C. Prescott, 2004. "Taxes, Regulations, and the Value of U.S. and U.K. Corporations," Levine's Bibliography 122247000000000715, UCLA Department of Economics.
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  10. Carol Corrado & Charles R. Hulten & Daniel E. Sichel, 2006. "Intangible capital and economic growth," Finance and Economics Discussion Series 2006-24, Board of Governors of the Federal Reserve System (U.S.).
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