Economics - Research Publications

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    Models of labour services andestimates of Total Factor Productivity
    DIXON, ROBERT ; SHEPHERD, DAVID ( 2007-01)
    This paper examines the manner in which labour services are modelled in the aggregateproduction function, concentrating on the relationship between numbers employed and averagehours worked. It argues that numbers employed and hours worked are not perfect substitutesand that conventional estimates of total factor productivity which, by using total hours workedas the measure of labour services, assume they are perfect substitutes, will be biased whenthere are marked changes in average hours worked. The relevance of the theoretical argumentis illustrated using data for the United States and the United Kingdom.
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    The Cyclical Dynamics and Volatilityof Australian Output and Employment
    DIXON, ROBERT ; SHEPHERD, DAVID ( 2006-07)
    In this paper we examine the volatility of aggregate output and employment in Australia withthe aid of a frequency filtering method (the Butterworth filter) that allows each time series to bedecomposed into trend, cycle and noise components. This analysis is compared with moretraditional methods based simply on the examination of first differences in the logs of the rawdata using cointegration-VAR modelling. We show that the application of univariate AR andbivariate VECM methods to the data results in a detrended series which is dominated by noiserather than cyclical variation and gives break points which are not robust to alternativedecomposition methods. Also, our conclusions challenge accepted wisdom in relation to outputvolatility in Australia which holds that there was a once and for all sustained reduction inoutput volatility in or around 1984. We do not find any convincing evidence for a sustainedreduction in the cyclical volatility of the GDP (or employment) series at that time, but we dofind evidence of a sustained reduction in the cyclical volatility of the GDP (and employment)series in 1993/4. We also find that there is a clear association between output volatility andemployment volatility. We discuss the key features of the business cycle we have identified aswell as some of the policy implications of our results.
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