Do technology shocks lead to a fall in total hours worked? * Harald Uhlig Humboldt University Berlin, University of Tilburg, and CEPR December 19, 2003 Abstract 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. Keywords: technology shocks, labor hoarding, leisure at the work place, medium- run identification JEL codes: E32, E24, C32, C15 * Acknowledgements: I am grateful to Neville Francis and Valerie Ramey for providing me their data. I am grateful to comments received at the EEA meeting in Stockholm 2003, and at seminar audiences at the ECB, CEMFI, Alicante and Carlos III. All remaining errors are my own. Address: Prof. Harald Uhlig, Humboldt University, Wirtschaftswissenschaftliche Fakult¨at, Spandauer Str. 1, 10178 Berlin, GERMANY. e-mail: uhlig@wiwi.hu-berlin.de, fax: +49-30-2093 5934, home page http://www.wiwi.hu-berlin.de/wpol/