RBC Models and the Hours-Wages Puzzle: Puzzle Solved!

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.

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Year of publication:	2015
Authors:	Vasilev, Aleksandar
Published in:	Ekonomia. - Warsaw : Faculty of Economic Sciences, University of Warsaw, ISSN 0137-3056. - Vol. 41.2015, p. 117-130
Publisher:	Warsaw : Faculty of Economic Sciences, University of Warsaw
Subject:	fiscal policy \| home production \| government spending shock \| indivisible labor

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Type of publication:	Article
Type of publication (narrower categories):	Article
Language:	English
Other identifiers:	10.17451/eko/41/2015/108 [DOI] 861628543 [GVK] hdl:10419/142147 [Handle] RePEc:zbw:espost:142147 [RePEc]
Classification:	C63 - Computational Techniques ; E32 - Business Fluctuations; Cycles ; E62 - Fiscal Policy; Public Expenditures, Investment, and Finance; Taxation
Source:	EconStor

Persistent link: https://www.econbiz.de/10011484206