On the endogeneity of output in dynamic labour-demand models

C. Gorter, W.H.J. Hassink, P. Nijkamp, E. Pels

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This paper investigates the endogeneity of output in the context of the standard dynamic labour-demand model. Using a panel of Dutch firms, we find that the assumption of endogeneity of output cannot be rejected, so that an adjusted procedure has to be followed in which information on the output expectations of entrepreneurs is used. The estimated effect of the endogenous, current output variable on employment appears to be significantly larger than the effect of the exogenous, expected output variable. The adjustment parameter of employment is however, remarkably robust against distinct specifications for output.
Original languageEnglish
Place of PublicationAmsterdam
PublisherFaculty of Economics and Business Administration, Vrije Universiteit Amsterdam
Number of pages29
Publication statusPublished - 1996

Publication series

NameResearch Memorandum

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