Working Paper

Overtime, effort and the propagation of business cycle shocks

Abstract: This paper presents and estimates a variant of Hansen and Sargent's (1988) real business cycle model with straight time and overtime. The model presented has only one latent variable, the state of technology, yet it does a better job propagating and magnifying shocks than the labor hoarding models which incorporate unobserved effort. This model, as well as a version of Burnside, Eichenbaum and Rebelo's (1993) labor hoarding model, is estimated using maximum likelihood. The maximum likelihood parameter estimates are compared to those using GMM.

Keywords: Business cycles; Labor market;

Status: Published in Journal of Monetary Economics, August 1996, pp 139-160

Bibliographic Information

Provider: Federal Reserve Bank of Chicago

Part of Series: Working Paper Series, Macroeconomic Issues

Publication Date: 1994

Number: 94-25