Labor Supply Shifts and Economic Fluctuations

Chang, Yongsung; Schorfheide, Frank

doi:10.2139/ssrn.268668

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Labor Supply Shifts and Economic Fluctuations

PIER Working Paper No. 00-002

44 Pages Posted: 7 Jun 2001

See all articles by Yongsung Chang

Yongsung Chang

University of Rochester - Department of Economics; Yonsei University - Department of Economics

University of Pennsylvania - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER); University of Pennsylvania - The Penn Institute for Economic Research (PIER)

There are 2 versions of this paper

Date Written: November 2000

Abstract

We investigate the role of labor-supply shifts in economic fluctuations. A new VAR identification scheme for labor supply shocks is proposed. Our method provides an alternative identification scheme, which does not rely on "zero-restrictions". According to our VAR analysis of post-war U.S. data, labor-supply shifts account for about half the variation in hours and one-fifth of variation in aggregate output. To assess the role of labor-supply shifts in a more structural framework, estimates from a dynamic stochastic general equilibrium (DSGE) model with stochastic variation in home production technology are compared to those from the VAR.

Keywords: Fluctuation of Hours, VAR Identification, Home Production, Bayesian Econometrics

JEL Classification: E32, C52, J22

Suggested Citation: Suggested Citation

Chang, Yongsung and Schorfheide, Frank, Labor Supply Shifts and Economic Fluctuations (November 2000). PIER Working Paper No. 00-002, Available at SSRN: https://ssrn.com/abstract=268668 or http://dx.doi.org/10.2139/ssrn.268668