pesavento_03

Emory University
Department of Economics
Working Papers

Title: Do Technology Shocks Drive Hours Up or Down? A Little Evidence From an Agnostic Procedure*

Number: 03-26

Author: Elena Pesavento and Barbara Rossi

Issue Date: November 2003 (revised October 2004)

Abstract: This paper analyzes the robustness of the estimate of a positive productivity shock on hours to the presence of a possible unit root in hours. Estimations in levels or in first differences provide opposite conclusions.
We rely on an agnostic procedure in which the researcher does not have to choose between a specification in levels or in first differences. We find that a positive productivity shock has a negative effect on hours, as in Francis and
Ramey (2001), but the effect is much more short-lived, and disappears after two quarters. The effect becomes positive at business cycle frequencies, as in Christiano et al. (2003).

Title:	Do Technology Shocks Drive Hours Up or Down? A Little Evidence From an Agnostic Procedure*
Number:	03-26
Author:	Elena Pesavento and Barbara Rossi
Issue Date:	November 2003 (revised October 2004)
Abstract:	This paper analyzes the robustness of the estimate of a positive productivity shock on hours to the presence of a possible unit root in hours. Estimations in levels or in first differences provide opposite conclusions. We rely on an agnostic procedure in which the researcher does not have to choose between a specification in levels or in first differences. We find that a positive productivity shock has a negative effect on hours, as in Francis and Ramey (2001), but the effect is much more short-lived, and disappears after two quarters. The effect becomes positive at business cycle frequencies, as in Christiano et al. (2003).

* Macroeconomic Dynamics, forthcoming

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