Persistence of business cycles in multisector real business cycle models

In this paper we explore whether the changing composition of output in response to technology shocks can play a significant role in the propagation of shocks over time. For this purpose we study two multisector real business cycle models, with two and three sectors. We find that, although the two-sector model requires a high intertemporal elasticity of substitution of consumption to match the various dynamic properties of US macroeconomic data, the three-sector model has a strong propagation mechanism under conventional parameterizations, as long as the factor intensities in the three sectors are different enough.     

On the cyclicality of schooling: theory and evidence

Economic theory indicates that opportunity- cost considerationstend to make schooling countercyclical whereas ability-to-payconsiderations have the opposite effect. We examine the collegeenrollment decisions of individuals in the US using the CurrentPopulation Survey and find that their propensity to enroll iscountercyclical. There seems to be significant substitutionduring the business cycle between human capital investment andcompeting economic activities.