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An Employment Equation For Australia: 1966-2001

Author

Listed:
  • Robert Dixon
  • John Freebairn
  • G C Lim

Abstract

We model the relationship between hours of work and employment and argue that unless actual hours are varying with a change in ‘standard hours’, actual hours should not appear in the long-run component of an equation for employment. If however standard hours are changing then it is desirable that this variable be incorporated into the employment equation. Our theoretical model yields an expression for the elasticity of employment with respect to standard hours which shows that the elasticity is related to the size of the premium for overtime. Using quarterly data for the period 1966:3 – 2001:3 we estimate a new employment equation for Australia incorporating standard hours of work. We find empirical support for our approach and we provide new estimates of the elasticity of employment with respect to the real wage and GDP. We also find a marked asymmetry in the response of employment to variations in real GDP and real wages in recession periods as against non-recession periods.

Suggested Citation

  • Robert Dixon & John Freebairn & G C Lim, 2004. "An Employment Equation For Australia: 1966-2001," Department of Economics - Working Papers Series 892, The University of Melbourne.
  • Handle: RePEc:mlb:wpaper:892
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    File URL: http://www.economics.unimelb.edu.au/downloads/wpapers-04/892.pdf
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    References listed on IDEAS

    as
    1. Steve Dowrick & Graeme Wells, 2004. "Modelling Aggregate Demand for Labour: A Critique of Lewis and MacDonald," The Economic Record, The Economic Society of Australia, vol. 80(251), pages 436-440, December.
    2. Russell, Bill & Tease, Warren, 1991. "Employment, Output and Real Wages," The Economic Record, The Economic Society of Australia, vol. 67(196), pages 34-45, March.
    3. F. P. R. Brechling, 1965. "The Relationship between Output and Employment in British Manufacturing Industries," Review of Economic Studies, Oxford University Press, vol. 32(3), pages 187-216.
    4. Neil R. Ericsson & James G. MacKinnon, 2002. "Distributions of error correction tests for cointegration," Econometrics Journal, Royal Economic Society, vol. 5(2), pages 285-318, June.
    5. Lewis, Philip E T & MacDonald, Garry, 2002. "The Elasticity of Demand for Labour in Australia," The Economic Record, The Economic Society of Australia, vol. 78(240), pages 18-30, March.
    6. Guy Debelle & Troy Swann, 1998. "Stylised Facts of the Australian Labour Market," RBA Research Discussion Papers rdp9804, Reserve Bank of Australia.
    7. A. J. Phipps & J. R. Sheen, 1995. "Macroeconomic Policy and Employment Growth in Australia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 28(1), pages 86-104.
    8. Dixon, R., 1996. "Apparent Asymmetries in the Relationship Between the Participation Rate and the Employment Rate in Australia," Department of Economics - Working Papers Series 522, The University of Melbourne.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Employment Determination; Demand for Labor; Australia;

    JEL classification:

    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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