DP4915 Trends in Hours, Balanced Growth and the Role of Technology in the Business Cycle

Author(s):	Jordi Galí
Publication Date:	February 2005
Keyword(s):	non-stationary hours, real business cycles, technology shocks
JEL(s):	E32
Programme Areas:	International Macroeconomics
Link to this Page:	cepr.org/active/publications/discussion_papers/dp.php?dpno=4915

The present paper revisits a property embedded in most dynamic macroeconomic models: the stationarity of hours worked. First, I argue that, contrary to what is often believed, there are many reasons why hours could be non-stationary in those models, while preserving the property of balanced growth. Second, I show that the post-war evidence for most industrialized economies is clearly at odds with the assumption of stationary hours per capita. Third, I examine the implications of that evidence for the role of technology as a source of economic fluctuations in the G7 countries.