Technology Shock and Employment: Do We Really Need DSGE Models with a Fall in Hours? Martial Dupaigne

also beneÞted from helpful remarks during presentation at IGIER and Banque de France seminars. The traditional disclaimer applies. The views expressed herein are those of the authors and not necessarily those of the Banque de France. The recent empirical literature that uses Structural Vector Autoregressions (SVAR) has shown that productivity shocks identiÞed using longrun restrictions lead to a persistent and signiÞcant decline in hours worked. This evidence calls into question standard RBC models in which a positive tech-nology shock leads to a rise in hours. In this paper, we estimate and test a standard RBC model using Indirect Inference on impulse responses of hours worked after technology and non-technology shocks. We Þnd that this model is not rejected by the data and is able to produce impulse responses in SVAR from simulated data similar to impulse responses in SVAR from actual data. Moreover, technology shocks represent the main contribution to the variance of the business cycle component of output under the estimated DSGE model. Our results suggest that we do not necessarily need DSGE models with a fall in hours to reproduce the results deriving from SVAR models