International Finance Discussion Papers (IFDP)
September 2003
How do Canadian Hours Worked Respond to a Technology Shock?
Lawrence J Christiano, Martin Eichenbaum, and Robert Vigfusson
Abstract:
This paper investigates the response of hours worked to a permanent technology shock. Based on annual data from Canada, we argue that hours worked rise after a positive technology shock. We obtain a similar result using annual data from the United States. These results contradict a large literature that claims that a positive technology shock causes hours worked to fall. We find that the different results are due to the literature making a specification error in the statistical model of per capital hours worked. Finally, we present results that Canadian monetary policy has accommodated technology shocks.
Keywords: Productivity, long-run restriction, hours worked, weak instruments
PDF: Full Paper
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