Paper #829

Title:

Trends in hours, balanced growth and the role of technology in the business cycle

Author:

Jordi Galí

Date:

January 2005

Abstract:

The present paper revisits a property embedded in most dynamic macroeconomic models: the stationarity of hours worked. First, I argue that, contrary to what is often believed, there are many reasons why hours could be nonstationary in those models, while preserving the property of balanced growth. Second, I show that the postwar evidence for most industrialized economies is clearly at odds with the assumption of stationary hours per capita. Third, I examine the implications of that evidence for the role of technology as a source of economic fl uctuations in the G7 countries.

Keywords:

real business cycles, technology shocks, market frictions, balanced growth path, stationarity of hours

JEL codes:

E32

Area of Research:

Macroeconomics and International Economics

Published in:

Federal Reserve Bank of St. Louis Review, 87(4), pp. 459-86, July/August 2005

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