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Endogenous Output in an Aggregate Model of the Labor Market

Author

Listed:
  • Richard E. Quandt

    (Princeton University)

  • Harvey S. Rosen

    (Princeton University)

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.

Suggested Citation

  • Richard E. Quandt & Harvey S. Rosen, 1988. "Endogenous Output in an Aggregate Model of the Labor Market," Working Papers 625, Princeton University, Department of Economics, Industrial Relations Section..
    • Handle: RePEc:pri:indrel:245
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    Cited by:

    1. W D A Bryant, 2009. "General Equilibrium:Theory and Evidence," World Scientific Books, World Scientific Publishing Co. Pte. Ltd., number 6875, August.
    2. Paul Oslington, 2012. "General Equilibrium: Theory and Evidence," The Economic Record, The Economic Society of Australia, vol. 88(282), pages 446-448, September.

    More about this item

    Keywords

    labor market;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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