Technology, Employment, and the Business Cycle: Do Technology Shocks Explain Aggregate Fluctuations / Jordi Gali.

Format:

Book

Author/Creator:

Gali, Jordi.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w5721.

NBER working paper series no. w5721

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Technology, Employment, and the Business Cycle

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1996.

Summary:

Using data for the G7 countries, I estimate conditional correlations of employment and productivity, based on a decomposition of the two series into technology and non-technology components. The picture that emerges is hard to reconcile with the predictions of the standard Real Business Cycle model. For a majority of countries the following results stand out: (a) technology shocks appear to induce a negative comovement between productivity and employment, counterbalanced by a positive comovement generated by demand shocks, (b) the impulse responses show a persistent decline of employment in response to a positive technology shock, and (c) measured productivity increases temporarily in response to a positive demand shock. More generally, the pattern of economic fluctuations attributed to technology shocks seems to be largely unrelated to major postwar cyclical episodes. A simple model with monopolistic competition, sticky prices, and variable effort is shown to be able to account for the empirical findings.

Notes:

Print version record

August 1996.