According to the neoclassical theory of production, demand for
labor in a rm will depend on the prices of inputs
and outputs as well as demand for the rm's product. An aggregate
demand for manufacturing employment (E)
would then presumably depend on the wage (W ), prices of other
inputs (P ), and aggregate price index (A) and
overall demand (Y ) approximated by GDP. All dierent regression of
employment in the manufacturing sector
of Sejong University are reported in Table for monthly data from
1981 through 2020. (Note: The dependent
variable is manufacturing employment (E), and the unit of E is 100
persons.)
- 2 Estimated Demand For Labor In Manufacturing Sector According To The Neoclassical Theory Of Production Demand For Labo 1 (31.53 KiB) Viewed 14 times
(b) What is ESS (explained sum of squares) in the Model (1)?
(c) Obtain R2 in Model (2).
(d) Does overall demand (Y ) signicantly aect labor demand (E) on
average in Model (2)? (Note: Please refer
to the probability table below.)
(e) According to production theory, a producer price index (P ) and
aggregate price index (A) are added to
Model (3). Test whether Model (2) is misspecied or not. In other
words, test the joint signicance of A and P .
In your answer, don't forget to state the null and alternative
hypothesis, the test statistics, and its distribution.
(Note: Please refer to the probability table below.)
Model (1) 6.89 (0.70) Regressor Model (2) Model (3) Constant 6.88 6.88 (0.90) (0.92) W (Wage) -0.41 -0.40 (0.06) (0.08) Y (Overall demand) 0.65 0.32 (0.08) (0.20) P (Producer price index) 0.20 (0.20) A (Aggregate price index) 0.21 (0.20) ESS ? 371 376 The numbers in parenthesis are standard deviations of the least squares estimates. Note that the total sum of squares (TSS) is 412 and the number of observation is 480.