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Models of Labour Services and Estimates of Australian Productivity

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  • Robert Dixon
  • John Freebairn

Abstract

This paper examines the manner in which labour services are modelled in the aggregate production function, concentrating on the specification of the relationship between the number of persons employed and average hours worked. We argue that, given the presence of quasi‐fixed costs of employment, hours of work and the number of employees cannot be perfect substitutes. We then show that estimates using total hours worked as the measure of labour input implicitly assumes that they are perfect substitutes and this false assumption results, inter alia, in biased estimates of the rate of labour and multifactor productivity growth in Australia.

Suggested Citation

  • Robert Dixon & John Freebairn, 2009. "Models of Labour Services and Estimates of Australian Productivity," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 42(2), pages 131-142, June.
    • Handle: RePEc:bla:ausecr:v:42:y:2009:i:2:p:131-142
    DOI: 10.1111/j.1467-8462.2009.00532.x
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    References listed on IDEAS

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    2. Kapteyn, Arie & Kalwij, Adriaan & Zaidi, Asghar, 2004. "The myth of worksharing," Labour Economics, Elsevier, vol. 11(3), pages 293-313, June.
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    11. M. S. Feldstein, 1967. "Specification of the Labour Input in the Aggregate Production Function," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 34(4), pages 375-386.
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    Cited by:

    1. Maya Eden, 2021. "Time‐Inseparable Labor Productivity and the Workweek," Scandinavian Journal of Economics, Wiley Blackwell, vol. 123(3), pages 940-965, July.
    2. Eden,Maya, 2016. "The week," Policy Research Working Paper Series 7598, The World Bank.

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