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TECHNOLOGY SHOCKS AND HOURS WORKED: A CROSS-COUNTRY ANALYSIS

Published online by Cambridge University Press:  27 August 2019

Jacqueline Thomet  and
Philipp Wegmueller
Jacqueline Thomet
Affiliation:
University of Bern
Philipp Wegmueller*
Affiliation:
Swiss State Secretariat for Economic Affairs
*
Address correspondence to: Philipp Wegmueller, Swiss State Secretariat for Economic Affairs (SECO), Bern, Switzerland. e-mail: wegmueller.philipp@gmail.com
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Abstract

We reassess the evidence for (or against) a key implication of the basic real business cycle model: that aggregate hours worked increase in response to a positive technology shock. Two novel aspects are the scope (14 OECD countries) and the inclusion of data on both labor supply margins to analyze the key margin of adjustment in aggregate hours. The short-run response of aggregate hours to a positive technology shock is remarkably similar across countries, with an impact fall in 13 out of 14 countries. In contrast, its decomposition into intensive and extensive labor supply margins reveals substantial heterogeneity in labor market dynamics across OECD countries. For instance, movements in the intensive margin are the dominant channel of adjustment in aggregate hours in 6 out of 14 countries of our sample, including France and Japan.

Keywords

Structural VARTechnology ShocksAggregate Hours WorkedLabor Supply MarginsRelative Price of Investment
Type
Articles
Information
Macroeconomic Dynamics , Volume 25 , Issue 4 , June 2021 , pp. 1020 - 1052
Copyright
© Cambridge University Press 2019

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Footnotes

We wish to thank Luca Benati and Fabrice Collard for guidance, and Andrea Raffo and Lee Ohanian for making the data available to us. We also thank the editor of the journal, two anonymous referees, Mario Forni, Jordi Galí, Christian Myohl, and participants of the Macro Workshop at the University of Bern and of the 2017 Spring Meeting of Young Economists for valuable comments. The views, opinions, findings, and conclusions or recommendations expressed in this paper are strictly those of the authors. They do not necessarily reflect the views of the State Secretariat for Economic Affairs (SECO). SECO does not take responsibility for any errors or omissions in, or for the correctness of, the information contained in this paper.

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