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Modelling Aggregate Labour Demand

Author

Listed:
  • Ross Hutchings

    (Treasury, Government of Australia)

  • Michael Kouparitsas

    (Treasury, Government of Australia)

Abstract

We derive a conditional long run labour demand equation via a representative firm level profit maximising problem, where production takes place according to a constant elasticity of substitution (CES) production function. This theoretical framework is augmented by cyclical explanatory variables to form an error correction model, which is then estimated using standard econometric methods. Estimates of important labour demand parameters, such as the elasticity of substitution between capital and labour, are consistent with previous Australian studies.

Suggested Citation

  • Ross Hutchings & Michael Kouparitsas, 2012. "Modelling Aggregate Labour Demand," Treasury Working Papers 2012-02, The Treasury, Australian Government, revised Dec 2012.
  • Handle: RePEc:tsy:wpaper:wpaper_tsy_wp_2012_2
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    File URL: http://www.treasury.gov.au/~/media/Treasury/Publications%20and%20Media/Publications/2012/Modelling%20Aggregate%20Labour%20Demand/Downloads/PDF/Labour_Demand_Model_WP.ashx
    File Function: First version, 2012
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    More about this item

    Keywords

    labour demand; technical change; production function;

    JEL classification:

    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General

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