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Is There Chronic Excess Supply of Labor? Designing a Statistical Test

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  • Richard E. Quandt
  • Harvey S. Rosen

Abstract

In this paper we present and implement a statistical test of the hypothesis that the labor market has chronic excess supply. The procedure is to estimate a disequilibrium labor market model, and construct a test statistic based on the unconditional probability that there is excess supply each period. We find that the data reject the hypothesis of chronic excess supply. Hence, one cannot assume that all observations lie on the demand curve.

Suggested Citation

  • Richard E. Quandt & Harvey S. Rosen, 1985. "Is There Chronic Excess Supply of Labor? Designing a Statistical Test," NBER Technical Working Papers 0046, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberte:0046
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    1. Sarantis, Nicholas C., 1981. "Employment, labor supply and real wages in market disequilibrium," Journal of Macroeconomics, Elsevier, vol. 3(3), pages 335-354.
    2. Rosen, Harvey S & Quandt, Richard E, 1978. "Estimation of a Disequilibrium Aggregate Labor Market," The Review of Economics and Statistics, MIT Press, vol. 60(3), pages 371-379, August.
    3. Eaton, Jonathan & Quandt, Richard E, 1983. "A Model of Rationing and Labour Supply: Theory and Estimation," Economica, London School of Economics and Political Science, vol. 50(199), pages 221-233, August.
    4. Romer, David, 1981. "Rosen and Quandt's Disequilibrium Model of the Labor Market: A Revision," The Review of Economics and Statistics, MIT Press, vol. 63(1), pages 145-146, February.
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