I estimate a decomposition of productivity and hours into technology and no
ntechnology components. Two results stand out: (a) the estimated conditiona
l correlations of hours and productivity are negative for technology shocks
, positive for nontechnology shocks; (b) hours show a persistent decline in
response to a positive technology shock. Most of the results hold for a va
riety of model specifications, and for the majority of G7 countries. The pi
cture that emerges is hard to reconcile with a conventional real-business-c
ycle interpretation of business cycles, but is shown to be consistent with
a simple model with monopolistic competition and sticky prices. (JEL E32, E
24).