Methods Versus Substance: Measuring the Effects of Technology Shocks on Hours
University of Minnesota - Twin Cities
University of Pennsylvania - Department of Economics; Centre for Economic Policy Research (CEPR)
Rutgers University; Rutgers University, New Brunswick/Piscataway, Faculty of Arts and Sciences-New Brunswick/Piscataway, Department of Economics
University of Pennsylvania - Department of Economics
Washington University in Saint Louis - Department of Economics
NBER Working Paper No. w15375
In this paper, we employ both calibration and modern (Bayesian) estimation methods to assess the role of neutral and investment-specific technology shocks in generating fluctuations in hours. Using a neoclassical stochastic growth model, we show how answers are shaped by the identification strategies and not by the statistical approaches. The crucial parameter is the labor supply elasticity. Both a calibration procedure that uses modern assessments of the Frisch elasticity and the estimation procedures result in technology shocks accounting for 2% to 9% of the variation in hours worked in the data. We infer that we should be talking more about identification and less about the choice of particular quantitative approaches.
Number of Pages in PDF File: 47working papers series
Date posted: September 28, 2009
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