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Testing weak exogeneity by multivariate cointegration techniques : the demand for labour in Finnish manufacturing


  • Jaakko Pehkonen

    (Department of Economics, University of Jyväskylä, Finland)


The study examines the efficiency of the single-equation approach in modelling employment determination in the context ofFinnish labour market data. The task is accomplished by using the multivariate cointegration techniques developed in Johansen (1988) and Johansen and Juselius (1990). The results suggest that the weak exogeneity of the conventional conditioning variables, including output, capital stock, wages, product prices and material prices cannot be taken for granted. The possibility of the loss of information involved in contemporaneous conditioning implies that care should be taken in applying single-equation methods to Finnish labour market data.

Suggested Citation

  • 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.
  • Handle: RePEc:fep:journl:v:7:y:1994:i:2:p:108-119

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    References listed on IDEAS

    1. Osterwald-Lenum, Michael, 1992. "A Note with Quantiles of the Asymptotic Distribution of the Maximum Likelihood Cointegration Rank Test Statistics," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 461-472, August.
    2. Holm, Pasi & Honkapohja, Seppo & Koskela, Erkki, 1994. "A monopoly-union model of wage determination with capital and taxes: An empirical application to the Finnish manufacturing," European Economic Review, Elsevier, vol. 38(2), pages 285-303, February.
    3. Harvey, A C, et al, 1986. "Stochastic Trends in Dynamic Regression Models: An Application to the Employment-Output Equations," Economic Journal, Royal Economic Society, vol. 96(384), pages 975-985, December.
    4. Wren-Lewis, Simon, 1986. "An Econometric Model of U.K. Manufacturing Employment Using Survey Data on Expected Output," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 1(4), pages 297-316, October.
    5. 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.
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    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand


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