RBC Models and the Hours-Wages Puzzle: Puzzle Solved!

Vasilev, Aleksandar (2015) RBC Models and the Hours-Wages Puzzle: Puzzle Solved! Ekonomia Journal, 41 (6). pp. 117-131. ISSN 0137-3056

Full content URL: http://dx.doi.org/10.17451/eko/41/2015/108

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RBC Models and the Hours-Wages Puzzle: Puzzle Solved!
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Abstract

This paper shows that a modified real business cycle (RBC) model, one that includes home production and fiscal spending shocks, can solve one of the RBC puzzles and generates zero correlation between wages and hours. In addition, the micro-founded model presented here provides a sound theoretical model to analyze fiscal policy in a neoclassical framework and is able to capture many aspects of the data that the benchmark RBC model was missing.

Keywords:fiscal policy, home production, government spending shock, indivisible labor
Subjects:L Social studies > L130 Macroeconomics
L Social studies > L140 Econometrics
Divisions:Lincoln International Business School
ID Code:34028
Deposited On:22 Nov 2018 16:53

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