Discussion Papers no. 256

Evidence from Norwegian manufacturing

The demand for labour and the Lucas critique

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.

Om publikasjonen

Tittel

The demand for labour and the Lucas critique. Evidence from Norwegian manufacturing

Ansvarlig

Pål Boug

Serie og -nummer

Discussion Papers no. 256

Utgiver

Statistics Norway, Research Department

Emne

Discussion Papers

Antall sider

32

Målform

Engelsk

Om Discussion Papers

Discussion papers comprise research papers intended for international journals and books. A preprint of a Discussion Paper may be longer and more elaborate than a standard journal article as it may include intermediate calculations, background material etc.

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