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The Business Cycle and the Life Cycle

The paper documents how cyclical fluctuations in market work vary over the life cycle and then assesses the predictions of a life-cycle version of the growth model for those observations. The analysis yields a simple but striking finding. The main discrepancy between the model and that data lies in the inability of the model to account for fluctuations in hours for individuals in the first half of their life cycle. The predictions for those in the latter half of the life cycle are quite close to the data.

JEL Classification: J22, E32

Key Words: life-cycle, hours volatility

Suggested citation: Gomme, Paul, Richard Rogerson, Peter Rupert, and Randall Wright, 2004. "The Business Cycle and the Life Cycle," Federal Reserve Bank of Cleveland, Working Paper no. 04-04.

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