[PDF] The Effects Of Permanent Technology Shocks On Labor Productivity And Hours In The Rbc Model eBook

Author : Jesper Lindé
Publisher :
Page : 24 pages
File Size : 39,33 MB
Release : 2006
Category :
ISBN :

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Recent work on the effects of permanent technology shocks argue that the basic RBC model cannot account for a negative correlation between hours worked and labor productivity. In this paper, I show that this conjecture is not necessarily correct. In the basic RBC model, I find that hours worked fall and labor productivity rises after a positive permanent technology shock once one allows for the possibility that the process for the permanent technology shock is slightly persistent in growth rates. A more serious limitation of the RBC model is its inability to generate a persistent rise in hours worked after a positive permanent technology shock along with a rise in labor productivity that are in line with what the data suggests. These results call for a reconsideration of the real and nominal frictions and policy response that need to be introduced in the basic RBC model in order to improve the model's ability to match the data.

Author : Mr.Pau Rabanal
Publisher : International Monetary Fund
Page : 68 pages
File Size : 20,98 MB
Release : 2004-12-01
Category : Business & Economics
ISBN : 1451875657

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Our answer: Not so well. We reached that conclusion after reviewing recent research on the role of technology as a source of economic fluctuations. The bulk of the evidence suggests a limited role for aggregate technology shocks, pointing instead to demand factors as the main force behind the strong positive comovement between output and labor input measures.

Author : Ms.Valerie Cerra
Publisher : International Monetary Fund
Page : 50 pages
File Size : 27,8 MB
Release : 2020-05-29
Category : Business & Economics
ISBN : 1513536990

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Traditionally, economic growth and business cycles have been treated independently. However, the dependence of GDP levels on its history of shocks, what economists refer to as “hysteresis,” argues for unifying the analysis of growth and cycles. In this paper, we review the recent empirical and theoretical literature that motivate this paradigm shift. The renewed interest in hysteresis has been sparked by the persistence of the Global Financial Crisis and fears of a slow recovery from the Covid-19 crisis. The findings of the recent literature have far-reaching conceptual and policy implications. In recessions, monetary and fiscal policies need to be more active to avoid the permanent scars of a downturn. And in good times, running a high-pressure economy could have permanent positive effects.

Author : Jordi Galí
Publisher :
Page : 64 pages
File Size : 11,49 MB
Release : 1996
Category : Business cycles
ISBN :

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Using data for the G7 countries, I estimate conditional correlations of employment and productivity, based on a decomposition of the two series into technology and non-technology components. The picture that emerges is hard to reconcile with the predictions of the standard Real Business Cycle model. For a majority of countries the following results stand out: (a) technology shocks appear to induce a negative comovement between productivity and employment, counterbalanced by a positive comovement generated by demand shocks, (b) the impulse responses show a persistent decline of employment in response to a positive technology shock, and (c) measured productivity increases temporarily in response to a positive demand shock. More generally, the pattern of economic fluctuations attributed to technology shocks seems to be largely unrelated to major postwar cyclical episodes. A simple model with monopolistic competition, sticky prices, and variable effort is shown to be able to account for the empirical findings.

Author : Mr.Nooman Rebei
Publisher : International Monetary Fund
Page : 41 pages
File Size : 43,75 MB
Release : 2012-08-01
Category : Business & Economics
ISBN : 1475505612

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The paper asks how state of the art DSGE models that account for the conditional response of hours following a positive neutral technology shock compare in a marginal likelihood race. To that end we construct and estimate several competing small-scale DSGE models that extend the standard real business cycle model. In particular, we identify from the literature six different hypotheses that generate the empirically observed decline in worked hours after a positive technology shock. These models alternatively exhibit (i) sticky prices; (ii) firm entry and exit with time to build; (iii) habit in consumption and costly adjustment of investment; (iv) persistence in the permanent technology shocks; (v) labor market friction with procyclical hiring costs; and (vi) Leontief production function with labor-saving technology shocks. In terms of model posterior probabilities, impulse responses, and autocorrelations, the model favored is the one that exhibits habit formation in consumption and investment adjustment costs. A robustness test shows that the sticky price model becomes as competitive as the habit formation and costly adjustment of investment model when sticky wages are included.

Author : Robert J. Barro
Publisher :
Page : 358 pages
File Size : 25,4 MB
Release : 1989
Category : Business & Economics
ISBN :

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The new classical approach to macroeconomics, which assumes that people gather and use economic information efficiently, has been the most important theoretical advance since the Keynesian revolution of the 1930s. This book surveys the major contributions of the "second generation" of proponents of the new classical approach, emphasizing real business cycle theories and applying them to a variety of phenomena. The chapters include expositions of growth theory, real models of business fluctuations, the informational role of prices, consumption, fiscal policy, rules versus discretion in monetary policy, time consistency and policy, and monetary models. Although the chapters are aimed at advanced undergraduate- and graduate-level students, they will also be of interest to researchers who are looking for a compact and original exposition of the new classical macroeconomics.

Author :
Publisher :
Page : pages
File Size : 50,68 MB
Release : 2007
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We construct a vintage capital model in which worker skills lie along a continuum and workers can be paired with different vintages (as technology evolves) under a matching rule of "best worker with the best machine". Labor reallocation in response to technology shocks has two key implications for the wage premium. First, it limits both the magnitude and duration of change in the wage premium following a (permanent) embodied technology shock, so empirically plausible shocks do not lead to the kind of increases in the wage premium observed in the U.S. during the 1980s and early 1990s (though an increase in labor force heterogeneity does). Second, positive disembodied technology shocks tend to push up the wage premium as well, and while this effect is small, it does mean that a higher premium does not provide unambiguous information about the underlying shock. Labor reallocation also means that if embodied technology comes to play a larger role in long-run growth, investment and savings tend to fall in steady state, with little effect on output and employment, enabling the household to increase consumption without sacrificing leisure. The short run effects are more conventional: permanent shocks to disembodied technology induce a strong wealth effect that reduces savings and induces a consumption boom while permanent shocks to embodied technology induce dominant substitution effects and an expansion characterized by an investment boom.