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Journal Article

Technology, Employment, and the Business Cycle: Do Technology Shocks Explain Aggregate Fluctuations?

Jordi Gali
The American Economic Review
Vol. 89, No. 1 (Mar., 1999), pp. 249-271
Stable URL: http://www.jstor.org/stable/116987
Page Count: 23
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Technology, Employment, and the Business Cycle: Do Technology Shocks Explain Aggregate Fluctuations?
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Abstract

I estimate a decomposition of productivity and hours into technology and non-technology components. Two results stand out: (a) the estimated conditional correlations of hours and productivity are negative for technology shocks, positive for nontechnology shocks; (b) hours show a persistent decline in response to a positive technology shock. Most of the results hold for a variety of model specifications, and for the majority of G7 countries. The picture that emerges is hard to reconcile with a conventional real-business-cycle interpretation of business cycles, but is shown to be consistent with a simple model with monopolistic competition and sticky prices.

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