Decomposition of hours based on extensive and intensive margins of labor

We decompose the underlying disturbances in total hours into three kinds: d isturbances that shift the level of employment in the long run, those that change the sectoral composition of employment in the long run, and those th at cause temporary movement of hours. Our identifying restriction exploits the distinctive nature of the two margins of labor: employment and hours pe r worker. Based on the postwar U.S. data, we find that aggregate and sector al disturbances are roughly equally important for the cyclical fluctuations of aggregate hours. (C) 2001 Elsevier Science B.V. All rights reserved.