How do Canadian Hours Worked Respond to a Technology Shock?

Abstract:     
This paper investigates the response of hours worked to a
permanent technology shock. Based on annual data from Canada,
we argue that hours worked rise after a positive technology
shock. We obtain a similar result using annual data from the
United States. These results contradict a large literature that
claims that a positive technology shock causes hours worked to
fall. We find that the different results are due to the
literature making a specification error in the statistical
model of per capital hours worked. Finally, we present results
that Canadian monetary policy has accommodated technology shocks.

Number of Pages in PDF File: 22

Keywords: productivity, long-run restriction, hours worked, weak instruments

JEL Classification: O51

working papers series