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Endogenous Output in an Aggregate Model of the Labor Market

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  • R)chard E. Quandt
  • Harvey S. Rosen

Abstract

A common feature to most aggregative studies of the labor market is a marginal productivity expression in which the quantity of labor appears on the left hand side of the equation, and the right hand side includes the real wage and output. A number of researchers have cautioned that if the output variable is treated as exogenous, serious econometric difficulties may result. However, the assumption that output is exogenous has not been tested. In this paper, we estimate an equilibrium model of the labor market, and use it to test the assumption of output exogeneity. We find that the assumption that output is exogenous cannot be rejected by the data.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Technical Working Papers with number 0074.

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Date of creation: Jan 1989
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Publication status: published as Quandt, Richard E. and Harvey S. Rosen. "Endogenous Output In An Aggregate Model Of The Labor Market," Review of Economics and Statistics, 1989, v71(3), 394-400.
Handle: RePEc:nbr:nberte:0074

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  1. Andrews, Martyn & Nickell, Stephen J, 1986. "A Disaggregated Disequilibrium Model of the Labour Market," Oxford Economic Papers, Oxford University Press, vol. 38(3), pages 386-402, November.
  2. Pagan, Adrian, 1984. "Econometric Issues in the Analysis of Regressions with Generated Regressors," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(1), pages 221-47, February.
  3. Symons, J & Layard, R, 1984. "Neoclassical Demand for Labour Functions for Six Major Economies," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 94(376), pages 788-99, December.
  4. Robert J. Barro & Chaipat Sahasakul, 1983. "Measuring the Average Marginal Tax Rate from the Individual Income Tax," University of Chicago - George G. Stigler Center for Study of Economy and State, Chicago - Center for Study of Economy and State 26, Chicago - Center for Study of Economy and State.
  5. Altonji, Joseph G, 1982. "The Intertemporal Substitution Model of Labour Market Fluctuations: An Empirical Analysis," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 49(5), pages 783-824, Special I.
  6. Quandt, Richard E & Rosen, Harvey S, 1986. "Unemployment, Disequilibrium and the Short Run Phillips Curve: An Econometric Approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 1(3), pages 235-53, July.
  7. Matthew D. Shapiro, 1986. "Capital Utilization and Capital Accumulation: Theory and Evidence," NBER Working Papers 1900, National Bureau of Economic Research, Inc.
  8. Paul M. Romer, 1987. "Crazy Explanations for the Productivity Slowdown," NBER Chapters, in: NBER Macroeconomics Annual 1987, Volume 2, pages 163-210 National Bureau of Economic Research, Inc.
  9. Lucas, Robert E, Jr & Rapping, Leonard A, 1969. "Real Wages, Employment, and Inflation," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 77(5), pages 721-54, Sept./Oct.
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Cited by:
  1. Swati Basu & Saul Estrin & Jan Svejnar, 2000. "Employment and Wages in Enterprises Under Communism and in Transition: Evidence From Central Europe and Russia," William Davidson Institute Working Papers Series 440, William Davidson Institute at the University of Michigan.
  2. Bonanno, Alessandro & Lopez, Rigoberto A., 2009. "Is Wal-Mart a Monopsony? Evidence from Local Labor Markets," 2009 Conference, August 16-22, 2009, Beijing, China, International Association of Agricultural Economists 51289, International Association of Agricultural Economists.
  3. Slaughter, Matthew J., 2001. "International trade and labor-demand elasticities," Journal of International Economics, Elsevier, Elsevier, vol. 54(1), pages 27-56, June.
  4. Guy Debelle & James Vickery, 1998. "The Macroeconomics of Australian Unemployment," RBA Annual Conference Volume, Reserve Bank of Australia, in: Guy Debelle & Jeff Borland (ed.), Unemployment and the Australian Labour Market Reserve Bank of Australia.
  5. Basu, Swati & Estrin, Saul & Svejnar, Jan, 2004. "Employment Determination in Enterprises under Communism and in Transition: Evidence from Central Europe," IZA Discussion Papers 1370, Institute for the Study of Labor (IZA).
  6. Stuart Glosser & Lonnie Golden, 2005. "Is labour becoming more or less flexible? Changing dynamic behaviour and asymmetries of labour input in US manufacturing," Cambridge Journal of Economics, Oxford University Press, Oxford University Press, vol. 29(4), pages 535-557, July.

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