On the endogeneity of output in dynamic labour-demand models

Cees Gorter; W.H.J. Hassink; Peter Nijkamp; Eric Pels

doi:10.1007/bf01208830

On the endogeneity of output in dynamic labour-demand models

Cees Gorter, W.H.J. Hassink, Peter Nijkamp, Eric Pels

Research output: Contribution to journal › Article › Academic › peer-review

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.

Original language	English
Pages (from-to)	393-408
Journal	Empirical Economics
Volume	22
DOIs	https://doi.org/10.1007/bf01208830
Publication status	Published - Sept 1997

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AB - 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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On the endogeneity of output in dynamic labour-demand models

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