Revisiting the “Productivity-Hours Puzzle” in the RBC Paradigm: The Role of Investment Adjustment Costs

Alice Albonico, Sarantis Kalyvitis and Evi Pappa

No 164, Quaderni di Dipartimento from University of Pavia, Department of Economics and Quantitative Methods

Abstract: 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'.

Keywords: technology shocks; productivity-hours puzzle; investment adjustment costs; wealth effect. (search for similar items in EconPapers)
JEL-codes: E22 E32 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2012-02
New Economics Papers: this item is included in nep-bec, nep-dge, nep-eff and nep-mac
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Citations: View citations in EconPapers (6)

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