The Response Of The Hours Worked To Technology Shocks In Taiwan Economy

The impact of the technical shock on the hours worked,which is the focus of the argument between the theory of RBC and the new Keynesian theory,has been discussed in this paper.Based on the theoretical research,this paper finds that when using SVAR model,the processing mode of hours worked as an endogenous variable will directly affect the direction of its response to the technology shocks.In view of this,the correlation UC model,which is superior to the SVAR model,are used in this paper to analyze the influence of technology shocks on the hours worked in Taiwan,effectively avoiding the measurement of the hours worked.This article is based on China’s Taiwan economy from 1981 to 2017.The logarithm of output per capita is decomposed into the productivity and hours worked per capita,and then are respectively dissociated into the trend term and the periodic term,along with the phillips curve containing the dummy variable of the economic structure change,establishing the unobservable component(UC)model consisting of three observable variables and five correlation shocks.Through the solution of the three variables related UC model,in-depth analysis of the relationship between the productivity trend,that is the technology shocks,and the periodic and trend terms of hours worked is carried out to study the relationship between the technology shocks and the hours worked under the economic structural changes in Taiwan.Two main conclusions are drawn as follows: first,the transformation of Taiwan’s economic mechanism leads to the instability of the relationship between the hours worked and inflation rate.In the short term,the phillips curve does not hold in Taiwan ’s economy.The structural contradiction caused by the economic changes in Taiwan,and the dual effect of rising prices and brain drain caused the "stagflationary" economic phenomenon,which makes the phillips curve do not hold.Second,There is a significant negative correlation between the permanent shock of productivity and the temporary shock of hours worked,and a significant positive correlation the permanent shock of hours worked.Indicating that technology shocks in Taiwan decrease labor time in the short term and increase in the long term.From the theoretical point,this paper illustrates RBC theory holds in Taiwan’s economy in the long term;From the empirical perspective,Taiwan’s hours worked,namely labor input,under the technology shocks shows a trend of "L" shape.That is,technology shocks in the short term "crowds out" the labor input,while in the long term this "crowding out" gradually weakens to gently swings.