Working Paper: NBER ID: w11694
Authors: Neville Francis; Valerie A. Ramey
Abstract: Structural vector autoregressions give conflicting results on the effects of technology shocks on hours. The results depend crucially on the assumed data generating process for hours per capita. We show that the standard measure of hours per capita has significant low frequency movements that are the source of the conflicting results. HP filtered hours per capita produce results consistent with the those obtained when hours are assumed to have a unit root. We provide an alternative measure of hours per capita that adjusts for low frequency movements in government employment, schooling, and the aging of the population. When the new measure is used to determine the effect of technology shocks on hours using long-run restrictions, both the levels and the difference specifications give the same answer: hours decline in the short-run in response to a positive technology shock.
Keywords: No keywords provided
JEL Codes: E2; E3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| standard measure of hours per capita (J38) | conflicting results in technology-hours debate (O33) |
| filtering out low frequency movements using HP filter (C22) | aligns results with theoretical expectations (C51) |
| positive technology shock (O49) | decline in hours worked (J22) |
| new measure of hours per capita (E01) | consistent results regarding technology shocks (O33) |