Endogenous Output in an Aggregate Model of the Labor Market

Author
Keywords
Abstract

A common feature to most aggregative studies of the labor market is a marginal productivity expression in which the quantity of labor appears on
the left hand side of the equation, and the right hand side includes the real
wage and output. A number of researchers have cautioned that if the output
variable is treated as exogenous, serious econometric difficulties may
result. However, the assumption that output is exogenous has not been
tested. In this paper, we estimate an equilibrium model of the labor market,
and use it to test the assumption of output exogeneity. We find that the
assumption that output is exogenous cannot be rejected by the data.

Year of Publication
1988
Number
245
Date Published
11/1988
Publication Language
eng
Citation Key
Review of Economics and Statistics, August, 1980.
URL
Working Papers