RBC Models and the Hours-Wages Puzzle: Puzzle Solved!
RBC Models and the Hours-Wages Puzzle: Puzzle Solved!
Author(s): Aleksandar VasilevSubject(s): Economy, National Economy
Published by: Uniwersytet Warszawski - Wydział Nauk Ekonomicznych
Keywords: fiscal policy; home production; government spending shock; indivisible labor
Summary/Abstract: This paper shows that a modified real business cycle (RBC) model, one that includes home production and fiscal spending shocks, can solve one of the RBC puzzles and generates zero correlation between wages and hours. In addition, the micro-founded model presented here provides a sound theoretical model to analyze fiscal policy in a neoclassical framework and is able to capture many aspects of the data that the benchmark RBC model was missing.
Journal: Ekonomia. Rynek, Gospodarka, Społeczeństwo
- Issue Year: 2015
- Issue No: 41
- Page Range: 117-131
- Page Count: 14
- Language: English