Does employment affect productivity?

Albert Van der Horst (), Hugo Rojas-Romagosa () and Leon Bettendorf ()

CPB Discussion Papers from CPB Netherlands Bureau for Economic Policy Analysis

Abstract: We investigate the trade-o¤ 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 e¤ect on productivity. Estimating a structural model with 3SLS, where employment depends on demographic variables and labour market institutions, we .nd that employment tends to boost productivity. Literature ignoring the endogeneity of employment, including our own OLS results, incorrectly .nds a negative or insigni.cant e¤ect from employment on productivity. The productivity gain is, however, not a guaranteed by-product of additional employment, as regressions with rolling windows reveal.

Keywords: labour productivity; employment (search for similar items in EconPapers)
JEL-codes: E20 J24 O41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-eff and nep-lab
Date: 2009-02
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Persistent link: http://EconPapers.repec.org/RePEc:cpb:discus:119

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