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Models of Labour Services and Estimates of Total Factor Productivity

  • Robert Dixon
  • David Shepherd

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.

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Paper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 981.

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Length: 14 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:mlb:wpaper:981
Contact details of provider: Postal: Department of Economics, The University of Melbourne, 4th Floor, FBE Building, Level 4, 111 Barry Street. Victoria, 3010, Australia
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