On the endogeneity of output in dynamic labour-demand models |
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Authors: | Cees Gorter Wolter Hassink Peter Nijkamp Eric Pels |
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Institution: | 1. Department of Regional Economics, Free University of Amsterdam, De Boelelaan 1105, 1081 HV, Amsterdam, The Netherlands 2. Department of Social Economics, University Utrecht, P.O. Box 80140, 3508 TC, Utrecht, The Netherlands
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Abstract: | This paper investigates the endogeneity of output in the context of the standard dynamic labour-demand model. Using a panel of Dutch firms, we find that the assumption of endogeneity of output cannot be rejected, so that an adjusted procedure has to be followed in which information on the output expectations of entrepreneurs is used. The estimated effect of the endogenous, current output variable on employment appears to be significantly larger than the effect of the exogenous, expected output variable. The adjustment parameter of employment is however, remarkably robust against distinct specifications for output. |
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