Does employment affect productivity?

Albert van der Horst, Hugo Rojas-Romagosa and Leon Bettendorf ()
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Leon Bettendorf: CPB Netherlands Bureau for Economic Policy Analysis

No 119, CPB Discussion Paper from CPB Netherlands Bureau for Economic Policy Analysis

Abstract: We investigate the trade-off between employment and labour productivity in a panel of OECD countries in 1970-2003. The endogeneity of employment is shown to matter crucially for assessing its effect on productivity. Estimating a structural model with 3SLS, where employment depends on demographic variables and labour market institutions, we find that employment tends to boost productivity. Literature ignoring the endogeneity of employment, including our own OLS results, incorrectly finds a negative or insignificant effect from employment on productivity. The productivity gain is, however, not a guaranteed by-product of additional employment, as regressions with rolling windows reveal.

JEL-codes: E20 J24 O41 (search for similar items in EconPapers)
Date: 2009-02
New Economics Papers: this item is included in nep-bec, nep-eff and nep-lab
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:cpb:discus:119

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