Preference shocks from aggregation: time series data evidence

Lilia Maliar and Serguei Maliar

Canadian Journal of Economics, 2004, vol. 37, issue 3, 768-781

Abstract: We investigate the impact of preference shocks on the aggregate dynamics of the U.S. economy in the context of a neoclassical growth model derived from aggregation. The aggregation result we use is as follows: if markets are complete and if agents have identical preferences of the addilog type, then the heterogeneous-agent economy where agents are subject to idiosyncratic productivity shocks behaves as if there was a representative consumer who faces shocks to preferences and technology. We estimate the parameters in the aggregation-based model from the aggregate time-series data and compute the numerical solution. We find that the preference shocks play an important role in the aggregate labour-market fluctuations.

JEL-codes: C73 D90 E21 (search for similar items in EconPapers)
Date: 2004
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Working Paper: PREFERENCE SHOCKS FROM AGGREGATION: TIME SERIES DATA EVIDENCE (2003)
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