Technology Shocks and Hours Worked: A Fractional Integration Perspective
44 Pages Posted: 10 Jan 2006
Date Written: December 30, 2005
Previous research has found that the response of hours worked to a technology shock crucially depends on whether the variable hours is assumed to be an I(0) or an I(1) variable ex-ante. In this paper we employ a multivariate fractionally integrated model which allows us to determine simultaneously the order of integration of hours worked and the response of hours to a technology shock. We find that hours fall on impact in response to a positive technology shock.
Keywords: Technology shocks, hours worked, fractional integration
JEL Classification: C12, C22, C32, C51, E32
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