Do Technology Shocks Lead to a Fall in Total Hours Worked

This paper contributes to the debate initiated by Gali (1999). I provide a theory with capital income taxation, labor hoarding as well as long-run shifts in the social attitudes to the work place modelled as ”leisure at the work place” to argue that there are other shocks that may influence labor productivity in the long run. I introduce ”medium-run identification” and show it to be superior to long-run identification or standard short-run identification, when applied to artificial data. With US data and medium-run identification, I find the robust result that technology shocks lead to a humpshaped response of total hours worked, which is mildly positive following a near-zero initial response.