English, Article, Journal or magazine article edition: Heterogeneity and aggregation in the labor market : implications for aggregate preference shifts Yongsung Chang; Sun-Bin Kim

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Bookmark: http://trove.nla.gov.au/version/75049
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Heterogeneity and aggregation in the labor market : implications for aggregate preference shifts
Author
  • Yongsung Chang
  • Sun-Bin Kim
Physical Description
  • preprint
Notes
  • The cyclical behavior of hours worked, wages, and consumption does not conform with the prediction of the representative agent with standard preferences. The residual in the intra-temporal first-order condition for commodity consumption and leisure is often viewed as a failure of labor-market clearing. We show that a simple heterogeneous-agent economy with incomplete markets and indivisible labor generates an aggregation error that looks much like the preference residual in the data. Our results caution against viewing the preference residual as a failure of labor-market clearing or a fundamental driving force of business cycles.
  • Aggregation, Heterogeneity, Incomplete Market, Aggregate Preference Shifts
  • RePEc:wpa:wuwpma:0402024
  • The cyclical behavior of hours of work, wages, and consumption does not conform with the prediction of the representative agent with standard preferences. The residual in the intra-temporal first-order condition for commodity consumption and leisure is often viewed as a failure of labor-market clearing. We show that a simple heterogeneous agent economy with incomplete markets and indivisible labor generates an aggregation error that looks much like the preference residual in aggregate data. Our results caution against viewing the preference residual as a failure of labor-market clearing or a fundamental driving force of business cycles.
  • Labor market
  • RePEc:fip:fedrwp:03-17
Language
  • English
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