Abstract
This paper analyzes the specific contribution of the external effects of human capital in explaining labor market fluctuations when Lucas’ (1988) endogenous growth model is considered. In particular, this article considers a generalized version of Ozlu’s (1996) stochastic human capital investment model with one modification: human capital externalities are included. It is found that hours worked fluctuate considerably more than productivity and that these externalities provide quantitative improvements in the so called productivity puzzle, since the correlation between output and productivity and between hours worked and productivity are reduced. These correlation results depend on the stochastic properties of human capital shocks, although the higher the size of the externality, the smaller the shock required.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
