Macroeconomic Fluctuations and the Allocation of Time
NBER Working Paper No. 5933 (Also Reprint No. r2184)
What are the fundamental driving forces of macroeconomic fluctuations? In particular, why do people spend more time working in booms and less in recessions? These are basic questions of macroeconomics. Recent thinking has emphasized technology shifts, preference shifts, and changes in government purchases as likely driving forces. It is useful to distinguish atemporal and intertemporal effects of the driving forces. Under standard assumptions, the technology shift has no effect through atemporal channels because income and substitution effects exactly offset. A straightforward decomposition of movements of employment attributes most of them to the atemporal effects of preference shifts.
Published: Journal of Labor Economics, Vol. 15, no. 1, part 2 (January 1997): S223-S250