Short-Run Employment Functions When the Speed of Adjustment Depends on the Unemployment Rate
The Review of Economics and Statistics
1984
A bstratAcross industry and country comparisons have found the speed of adjustment in short-run employment functions to be positively related to the rate of unemployment. The present paper develops a time-series model in which the reaction coefficient varies with unemployment, and estimates it for the manufacturing sectors of the eight OECD countries for which suitable data are available. The new model is non-linear and is estimated using full information maximum-likelihood procedures. Application of the log-likelihood ratio test finds that the new vanable reaction coefficient model is superior to the fixed reaction coefficient model for the United States, Canada, Australia, Austria, Ireland and the United Kingdom.
- DOI
- 10.2307/1924705
- Volume
- 66 (1)
- Pages
- 138
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- BibTeX
- Sources
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