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Survey Expectations vs. Rational Expectations in the Estimation of a Dynamic Model: Demand for Labour in Finnish Manufacturing

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  • Ilmakunnas, Pekka

Abstract

Rational expectations of the errors-in-variables type and expectations series quantified from qualitative business survey data are compared in the estimation of a dynamic labor-demand model for the Finnish manufacturing. Replacing future expected values of variables by realizations creates a serially correlated error structure in a rational expectations model. It is shown that when survey expectations are used, this kind of serially correlated error does not appear. Therefore, the estimation of the model is simpler. The empirical results show that the dynamics implied by a simple rational expectations version of the model are not supported by the data. Survey expectations lead to realistic estimates of the parameters of the model. Copyright 1989 by Blackwell Publishing Ltd

Suggested Citation

  • Ilmakunnas, Pekka, 1989. "Survey Expectations vs. Rational Expectations in the Estimation of a Dynamic Model: Demand for Labour in Finnish Manufacturing," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 51(3), pages 297-314, August.
  • Handle: RePEc:bla:obuest:v:51:y:1989:i:3:p:297-314
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    References listed on IDEAS

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    1. von Braun, Joachim & Pandya-Lorch, Rajul, 1991. "Income sources of malnourished people in rural areas: Microlevel information and policy implications," IFPRI working papers 5, International Food Policy Research Institute (IFPRI).
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    6. Fields, Gary S, 1979. "Income Inequality in Urban Colombia: A Decomposition Analysis," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 25(3), pages 327-341, September.
    7. Lerman, Robert I & Yitzhaki, Shlomo, 1985. "Income Inequality Effects by Income," The Review of Economics and Statistics, MIT Press, vol. 67(1), pages 151-156, February.
    8. Hans De Kruijk, 1987. "Sources of Income Inequality in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 26(4), pages 659-672.
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    Cited by:

    1. Jaakko Pehkonen, 1994. "Testing weak exogeneity by multivariate cointegration techniques : the demand for labour in Finnish manufacturing," Finnish Economic Papers, Finnish Economic Association, vol. 7(2), pages 108-119, Autumn.
    2. Kangasharju, Aki & Pehkonen, Jaakko, 1999. "Employment-output link in Finland: evidence from regional-level data," ERSA conference papers ersa99pa304, European Regional Science Association.
    3. Aki Kangasharju & Jaakko Pehkonen, 2001. "Employment-output link in Finland : evidence from regional data," Finnish Economic Papers, Finnish Economic Association, vol. 14(1), pages 41-50, Spring.

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