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Hours per Capita and Productivity: Evidence from Correlated Unobserved Components Models

  • Arabinda Basistha

    (West Virginia University)

Recent studies debate the effect of a permanent productivity shock on hours per capita within a structural VAR context. This paper examines the issue using a correlated unobserved components (UC) framework. The estimates show that permanent shocks to productivity are negatively correlated with transitory shocks to hours. This result is robust for non-stationary, levels stationary and differenced stationary specifications of hours. A comparison of the UC framework to the structural VAR framework shows that the UC framework with hours in levels performs better.

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File URL: http://www.be.wvu.edu/phd_economics/pdf/06-02.pdf
File Function: First version, 2006
Download Restriction: no

Paper provided by Department of Economics, West Virginia University in its series Working Papers with number 06-02 Classification- JEL: E31, E32, E50.

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Length: 33 pages
Date of creation: 2006
Date of revision:
Handle: RePEc:wvu:wpaper:06-02
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Web page: http://www.be.wvu.edu/phd_economics/
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