Quarterly Review 1621

The Labor Market in Real Business Cycle Theory

Gary D. Hansen
Randall Wright - Consultant

Spring 1992

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)

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