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Real business cycles with a human capital investment sector and endogenous growth: persistence, volatility and labor puzzles

Dang, Jing, Gillman, Max and Kejak, Michal 2011. Real business cycles with a human capital investment sector and endogenous growth: persistence, volatility and labor puzzles. [Working Paper]. Cardiff Economics Working Papers, Cardiff: Cardiff Univeristy. Available at: http://business.cardiff.ac.uk/sites/default/files/...

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Abstract

A positive joint two-sector productivity shock causes Rybczynski (1955) and Stolper and Samuelson (1941) e¤ects that release leisure time and initially raises the relative price of human capital invest- ment so as to favor it over goods production. This enables a basic RBC model, modi�ed by having the household sector produce hu- man capital investment sector, to succeed along related major dimen- sions of output, consumption, investment and labor, similar to the international approach of Ma¤ezzoli (2000). By modifying the dy- namics relative to the important work of Jones et al. (2005), two key US facts stressed by Cogley and Nason (1995) are captured: per- sistent movements in the growth rates of output and hump-shaped impulse responses of output. Further, physical capital investment has data consistent persistence within a hump-shaped impulse response. And Gali�s (1999) challenging empirical �nding that labour supply decreases upon impact of a positive productivity shock is reproduced, while volatility in working hours is also data-consistent because of the substitution between market and nonmarket sectors.

Item Type: Monograph (Working Paper)
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Uncontrolled Keywords: Real business cycle, human capital, persistence, volatil- ity, labor
Additional Information: E2011/8, March.
Publisher: Cardiff Univeristy
Date of First Compliant Deposit: 30 March 2016
Last Modified: 19 Mar 2016 22:58
URI: http://orca-mwe.cf.ac.uk/id/eprint/33728

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