The response of hours to technology shocks is a key controversy in macroeconomics. We show that differences between RBC and NK models hinge on highly restrictive views of technology. We introduce CES production technologies and demonstrate that the response of hours depends on the factor-augmenting nature of shocks and the capital-labor substitution elasticity in both models. We develop analytical expressions to establish the thresholds determining its sign. This opens new margins for shock identification combining theory and VAR evidence. We discuss how our models provide new robust restrictions for empirical work, especially using the labor income share. © 2014 by the European Economic Association.

Shocking stuff. Technology, hours, and factor substitution / Cantore, C.; Leon-Ledesma, M.; Mcadam, P.; Willman, A.. - In: JOURNAL OF THE EUROPEAN ECONOMIC ASSOCIATION. - ISSN 1542-4766. - 12:1(2014), pp. 108-128. [10.1111/jeea.12038]

Shocking stuff. Technology, hours, and factor substitution

Cantore C.;
2014

Abstract

The response of hours to technology shocks is a key controversy in macroeconomics. We show that differences between RBC and NK models hinge on highly restrictive views of technology. We introduce CES production technologies and demonstrate that the response of hours depends on the factor-augmenting nature of shocks and the capital-labor substitution elasticity in both models. We develop analytical expressions to establish the thresholds determining its sign. This opens new margins for shock identification combining theory and VAR evidence. We discuss how our models provide new robust restrictions for empirical work, especially using the labor income share. © 2014 by the European Economic Association.
2014
technology shocks; hours worked; RBC and NK models; nor-malization; factor substitution; factor bias
01 Pubblicazione su rivista::01a Articolo in rivista
Shocking stuff. Technology, hours, and factor substitution / Cantore, C.; Leon-Ledesma, M.; Mcadam, P.; Willman, A.. - In: JOURNAL OF THE EUROPEAN ECONOMIC ASSOCIATION. - ISSN 1542-4766. - 12:1(2014), pp. 108-128. [10.1111/jeea.12038]
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11573/1676279
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