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The Response of Hours to a Technology Shock: a Two-Step Structural VAR Approach

Patrick Fève and Alain Guay

Cahiers de recherche from CIRPEE

Abstract: The response of hours worked to a technology shock is an important and a controversial issue in macroeconomics. Unfortunately, the estimated response is generally sensitive to the specification of hours in SVARs. This paper uses a simple two-step approach in order to consistently estimate technology shocks from a SVAR model and the response of hours that follow this shock. The first step considers a SVAR model with a set of relevant stationary variables, but excluding hours. Given a consistent estimate of technology shocks in the first step, the response of hours to this shock is estimated in a second step. When applied to US data, the two-step approach predicts a short-run decrease of hours after a technology improvement followed by a hump-shaped positive response. This result is robust to the specification of hours, different sample periods, measures of hours and output and to the variables included in the VAR in the first step.

Keywords: SVARs; long-run restriction; technology shocks; consumption to output ratio; hours worked (search for similar items in EconPapers)
JEL-codes: C32 E32 (search for similar items in EconPapers)
Date: 2007
New Economics Papers: this item is included in nep-bec, nep-cba and nep-mac
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http://www.cirpee.org/fileadmin/documents/Cahiers_2007/CIRPEE07-37.pdf (application/pdf)

Related works:
Journal Article: The Response of Hours to a Technology Shock: A Two-Step Structural VAR Approach (2009)
Journal Article: The Response of Hours to a Technology Shock: A Two‐Step Structural VAR Approach (2009) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:lvl:lacicr:0737

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