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Reconciling Jaimovich-Rebello Preferences, Habit in Consumption and Labor Supply

Holden, Tom, Levine, Paul and Swarbrick, Jonathan (2018) Reconciling Jaimovich-Rebello Preferences, Habit in Consumption and Labor Supply Economics Letters, 168. pp. 132-137.

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Abstract

This note studies a form of a utility function of consumption with habit and leisure that (a) is compatible with long-run balanced growth, (b) hits a steady state observed target for hours worked and (c) is consistent with micro-econometric ev- idence for the inter-temporal elasticity of substitution and the Frisch elasticity of labor supply. Employing Jaimovich-Rebello preferences our results highlight a con- straint on the preference parameter needed to target the steady-state Frisch elastic- ity. This leads to a lower bound for the latter that cannot be reconciled empirically with external habit, but the introduction of a labor wedge solves the problem. We also propose a dynamic Frisch inverse elasticity measure and examine its business cycle properties.

Item Type: Article
Divisions : Faculty of Arts and Social Sciences > School of Economics
Authors :
NameEmailORCID
Holden, Tomt.holden@surrey.ac.uk
Levine, PaulP.Levine@surrey.ac.uk
Swarbrick, Jonathanj.m.swarbrick@surrey.ac.uk
Date : 25 April 2018
DOI : 10.1016/j.econlet.2018.04.013
Copyright Disclaimer : © 2018. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/
Uncontrolled Keywords : Jaimovich-Rebello Preferences, Habit in Consumption, Labor Supply, Dynamic Frisch Elasticity, Labor Wedge
Depositing User : Melanie Hughes
Date Deposited : 09 May 2018 13:42
Last Modified : 19 Jun 2019 08:39
URI: http://epubs.surrey.ac.uk/id/eprint/846382

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