The Effects of Permanent Technology Shocks on Labour Productivity and Hours in the RBC Model

Jesper Lindé

No 4827, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: 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 labour 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 labour productivity rises after a positive permanent technology shock once one allows for the possibility that the process for the permanent technology shock is 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 labour productivity that are in line with what the data suggests.

Keywords: hours worked per capita; labour productivity; permanent technology shocks; real business cycle model; vector autoregressions (search for similar items in EconPapers)
JEL-codes: E24 E32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-mac
Date: 2005-01
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Working Paper: The Effects of Permanent Technology Shocks on Labor Productivity and Hours in the RBC model (2004)
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