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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