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Employment, Hours per Worker and the Business Cycle

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  • Fernandez-Corugedo Emilio

Abstract

We examine the impact that technology shocks have in a trivariate VAR that includes productivity, hours worked per person and the employment ratio. These last two variables have trends that make them non-stationary. There are three results of interest. First, a technology shock reduces both hours and employment if those two variables are specified in first differences, with the response of employment being stronger than the response of hours. Second, a technology shock increases both hours and employment, when those two variables are specified in levels, although in this case the response of hours worked per person is stronger. Third, considering the possibility of changes in the trend growth rate of productivity reverses the results for the VARs with data in levels only. We also present a model that replicates some of the results for hours and employment.

Suggested Citation

  • Fernandez-Corugedo Emilio, 2007. "Employment, Hours per Worker and the Business Cycle," Working Papers 2007-02, Banco de México.
    • Handle: RePEc:bdm:wpaper:2007-02
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    References listed on IDEAS

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    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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