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Measurement error and time aggregation: a closer look at estimates of output-labor elasticities

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Author Info
Marcello Estevao

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Abstract

This paper analyzes the effect of time aggregation on estimates of the elasticities of output with respect to employment and to average hours of work. The main goal is to get accurate estimates of production function parameters. Low frequency data generate better estimates of output-employment elasticity while high frequency data generate better estimates of output-average hours elasticity. This result comes from the fact that time aggregation increases (decreases) the bias in the estimate of the elasticity with respect to average hours (employment). Estimations of these elasticities at different data frequencies and numerical simulations illustrate this point. In addition, this estimation methodology shows that the elasticity of output with respect to employment is bigger than the elasticity of output with respect to average hours, as theory predicts, contradicting an established result in the literature.

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Publisher Info
Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 96-2.

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Date of creation: 1996
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Handle: RePEc:fip:fedgfe:96-2

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Related research
Keywords: Labor productivity;

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Shulamit Kahn & Kevin Lang, 1988. "The Effects of Hours Constraints on Labor Supply Estimates," NBER Working Papers 2647, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. Bresnahan, Timothy F & Ramey, Valerie A, 1994. "Output Fluctuations at the Plant Level," The Quarterly Journal of Economics, MIT Press, vol. 109(3), pages 593-624, August. [Downloadable!] (restricted)
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  3. Shea, John, 1993. "The Input-Output Approach to Instrument Selection," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(2), pages 145-55, April.
  4. Marcello Estevão, 1993. "Employment level, hours of work and labor adjustment cost in the Brazilian industry," Revista Brasileira de Economia, Graduate School of Economics, Getulio Vargas Foundation (Brazil), vol. 47(2), April.
  5. Trejo, Stephen J, 1991. "The Effects of Overtime Pay Regulation on Worker Compensation," American Economic Review, American Economic Association, vol. 81(4), pages 719-40, September. [Downloadable!] (restricted)
  6. Leslie, Derek G & Wise, John, 1980. "The Productivity of Hours in U.K. Manufacturing and Production Industries," Economic Journal, Royal Economic Society, vol. 90(357), pages 74-84, March. [Downloadable!] (restricted)
  7. Zellner, Arnold & Montmarquette, Claude, 1971. "A Study of Some Aspects of Temporal Aggregation Problems in Econometric Analyses," The Review of Economics and Statistics, MIT Press, vol. 53(4), pages 335-42, November. [Downloadable!] (restricted)
  8. Dickens, William T & Lundberg, Shelly J, 1993. "Hours Restrictions and Labor Supply," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(1), pages 169-92, February. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Pereira da Silva, Luiz & Essama-Nssah, B. & Samake, Issouf, 2002. "A poverty analysis macroeconomic simulator (PAMS) linking household surveys with macro-models," Policy Research Working Paper Series 2888, The World Bank. [Downloadable!]
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