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Models of Labour Services and Estimates of Total Factor Productivity

Author

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  • Robert Dixon
  • David Shepherd

Abstract

This paper examines the manner in which labour services are modelled in the aggregate production function, concentrating on the relationship between numbers employed and average hours worked. It argues that numbers employed and hours worked are not perfect substitutes and that conventional estimates of total factor productivity which, by using total hours worked as the measure of labour services, assume they are perfect substitutes, will be biased when there are marked changes in average hours worked. The relevance of the theoretical argument is illustrated using data for the United States and the United Kingdom.

Suggested Citation

  • Robert Dixon & David Shepherd, 2007. "Models of Labour Services and Estimates of Total Factor Productivity," Department of Economics - Working Papers Series 981, The University of Melbourne.
    • Handle: RePEc:mlb:wpaper:981
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    File URL: http://fbe.unimelb.edu.au/__data/assets/pdf_file/0006/802815/981.pdf
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    References listed on IDEAS

    as
    1. repec:dgr:rugggd:200363 is not listed on IDEAS
    2. Timmer, Marcel P. & Ypma, Gerard & Ark, Bart van der, 2003. "IT in the European Union: driving productivity divergence?," GGDC Research Memorandum 200363, Groningen Growth and Development Centre, University of Groningen.
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    5. Sarah Dolfin, 2006. "An examination of firms' employment costs," Applied Economics, Taylor & Francis Journals, vol. 38(8), pages 861-878.
    6. Raul Crespo, 2008. "Total factor productivity: an unobserved components approach," Applied Economics, Taylor & Francis Journals, vol. 40(16), pages 2085-2097.
    7. F. P. R. Brechling, 1965. "The Relationship between Output and Employment in British Manufacturing Industries," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 32(3), pages 187-216.
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    Cited by:

    1. Sharifah Rahama Amirul & Khairul Hanim Pazim & Sharifah Milda Amirul & Rasid Mail & Jakaria Dasan, 2022. "Developing and validating the qualitative labour productivity measurement in service industry," Quality & Quantity: International Journal of Methodology, Springer, vol. 56(4), pages 2853-2874, August.

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    More about this item

    Keywords

    Labour Services; Production Function; Total Factor Productivity;
    All these keywords.

    JEL classification:

    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production

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