The Demand for Labour and the Lucas Critique. Evidence from Norwegian Manufacturing

Pål Boug ()
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Pål Boug: Statistics Norway, https://www.ssb.no/en/forskning/ansatte

Discussion Papers from Statistics Norway, Research Department

Abstract: This paper uses neoclassical theory as a foundation for modelling labour demand in Norwegian manufacturing. Applying the Johansen (1988,1991) methodology, we obtain a single cointegrating vector between employment, production, relative factor prices, total factor productivity and the stock of real capital. Normalised on employment, the estimated long run elasticities are 1.37 (production), -0.32 (relative factor prices), -0.57 (total factor productivity) and -1.00 (the stock of real capital). Next, we develop a conditional labour demand model that exhibits parameter constancy. In addition to equilibrium correction effects, we find contemporaneous effects of production and relative factor prices. We cannot reject super exogeneity to be present in our labour demand equation. Hence, the evidence on labour demand in Norwegian manufacturing does not lend support to the Lucas critique.

Keywords: Labour demand; cointegration; conditioning; equilibrium correction model; parameter constancy; exogeneity; Lucas critique. (search for similar items in EconPapers)
JEL-codes: C22 C32 E13 J23 (search for similar items in EconPapers)
Date: 1999-06
New Economics Papers: this item is included in nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:ssb:dispap:256

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