Testing Dynamic Specification of Factor Demand Equations for U.S. Manufacturing

Jane Friesen

The Review of Economics and Statistics, 1992, vol. 74, issue 2, 240-50

Abstract: This paper addresses the question of dynamic specification of empirical models of factor demand for annual U.S. manufacturing data from 1947 to 1981. Frequently used models that treat a subset of factors as variable are shown to be misspecified. An error-correction model is considered as an alternative specification. This model is shown to dominate several more parsimonious models in several respects. However, like the other models considered, the error-correction model is unable to generate satisfactory estimates of long-run elasticities. The issue of dynamic specification remains unresolved. Copyright 1992 by MIT Press.

Date: 1992
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