Is consumption more or less variable than predicted by the permanent-income hypothesis? To answer that question, the author develops a procedure based on a long-run restriction implied by the consumer's intertemporal budget constraints. In contrast to previous work, the approach here (1) does...

The author estimate a decomposition of productivity and hours into technology and nontechnology components. Two results stand out: (1) the estimated conditional correlations of hours and productivity are negative for technology shocks, positive for nontechnology shocks; and (2) hours show a...