Sweat equity
By: Ellen R. McGrattan and Edward C. Prescott.
Contributors: Prescott, Edward C.; Federal Reserve Bank of Minneapolis. Research Dept.
Series: Working paper / Federal Reserve Bank of Minneapolis, Research Dept. ;; 636; Working paper (Federal Reserve Bank of Minneapolis : Online) ;; 636.
Publisher: Federal Reserve Bank of Minneapolis, Research Dept.
Published: 2005
Place of publication: [Minneapolis, MN]
Language: eng
Format: Electronic resource
Description: Sweat equity is investment in a business that is financed by owner-workers being compensated at less than their market rate. Taking into account the hours spent building sweat equity while ignoring the output introduces an error in measured productivity and distorts the picture of what is happening in the economy. In this paper, we incorporate sweat equity in an otherwise standard business cycle model. We use the model to analyze productivity in the United States during the 1990s boom. We find that sweat investment was large during this period and critical for understanding the dramatic rise in hours and the modest growth in productivity.
Notes: Includes bibliographical references.
Title from PDF file (viewed on June 22, 2005).
"June 2005."
Also available in print.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.