Interpreting the Hours-Technology time-varying relationship

Cantore, C, Leon-Ledesma, M and Ferroni, F (2012) Interpreting the Hours-Technology time-varying relationship Working Paper.

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Abstract

We investigate the time variation in the correlation between hours and technology shocks using a structural business cycle model. We propose an RBC model with a Constant Elasticity of Substitution (CES) production function that allows for capital- and labor-augmenting technology shocks. We estimate the model using US data with Bayesian techniques. In the full sample, we find (i) evidence in favor of a less than unitary elasticity of substitution (rejecting Cobb-Douglas) and (ii) a sizable role for capital augmenting shock for business cycles fluctuations. In rolling sub-samples, we document that the impact of technology shocks on hours worked varies over time and switches from negative to positive towards the end of the sample. We argue that this change is due to the increase in the elasticity of factor substitution. That is, labor and capital became less complementary throughout the sample inducing a change in the sign and size of the the response of hours. We conjecture that this change may have been induced by a change in the skill composition of the labor input.

Item Type:	Monograph (Working Paper)
Divisions :	Faculty of Arts and Social Sciences > School of Economics
Authors :	Cantore, C, Leon-Ledesma, M and Ferroni, F
Date :	1 January 2012
Related URLs :	ftp://ftp.ukc.ac.uk/pub/ejr/RePEc/ukc/uk... Organisation
Additional Information :	Reproduced with permission of the authors. © European Central Bank, 2010. All rights reserved. Any reproduction, publication and reprint in the form of a different publication, whether printed or produced electronically, in whole or in part, is permitted only with the explicit written authorisation of the ECB or the authors. Information on all of the papers published in the ECB Working Paper Series can be found on the ECB’s website, http://www. ecb.europa.eu/pub/scientific/wps/date/ html/index.en.html ISSN 1725-2806 (online)
Depositing User :	Symplectic Elements
Date Deposited :	22 May 2012 18:42
Last Modified :	27 Mar 2020 12:30
URI:	http://epubs.surrey.ac.uk/id/eprint/427919

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