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The Labor Market in Real Business Cycle Theory

Quarterly Review 1621 | Spring 1992

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The Labor Market in Real Business Cycle Theory


The standard real business cycle model fails to adequately account for two facts found in the U.S. data: the fact that hours worked fluctuate considerably more than productivity and the fact that the correlation between hours worked and productivity is close to zero. In this paper, in a unified framework, the authors describe and analyze four extensions of the standard model, by introducing nonseparable leisure, indivisible labor, government spending, and household production.

Published In: _Real Business Cycles: A Reader_ (1998, pp. 168-178)
Published In: _The Rational Expectations Revolution: Readings from the Front Line_ (1994, pp. 335-353)