Hours and employment variation in business cycle theory

Finn E. Kydland, Edward C. Prescott

Research output: Contribution to journalArticlepeer-review

102 Scopus citations


Previous business cycle models have made the assumption that all the variation in the labor input is either due to changes in hours per worker or changes in number of workers, but not both. In this paper, both vary. We think this is a better model for estimating the contribution of Solow technology shocks to aggregate fluctuations. We find that about 70% of the variance of U.S. postwar cyclical fluctuations is induced by variations in the Solow technology parameter.

Original languageEnglish (US)
Pages (from-to)63-81
Number of pages19
JournalEconomic Theory
Issue number1
StatePublished - Mar 1991
Externally publishedYes

ASJC Scopus subject areas

  • Economics and Econometrics


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