Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5099514 | Journal of Economic Dynamics and Control | 2007 | 30 Pages |
Abstract
The first-order condition (FOC) associated with labour in many dynamic general equilibrium models involves only current period variables. Residuals constructed from this FOC are inconsistent with aggregate US data in that they are very large and highly persistent. The persistence suggests that models which introduce dynamic terms in the labour FOC may be more consistent with the data. Three such models (one with learning by doing, one with habit formation, and one with labour adjustment costs) confirm that they can reduce the persistence in the residuals making the models more consistent with the joint dynamics of consumption, output and hours.
Keywords
Related Topics
Physical Sciences and Engineering
Mathematics
Control and Optimization
Authors
Alok Johri, Marc-André Letendre,