Employment Functions and the Slowdown in Uk Productivity Growth

Abstract

This paper investigates the employment demand function in the light of recent developments in econometric modelling procedures. The evidence for structural breaks in the equation for the UK manufacturing sector in 1966/67 and 1973/74 is re-examined, and the behaviour of employment in the post-1979 recession is analysed. The empirical results illustrate the problems raised for estimating employment equations by the productivity slowdown in the 1970s, and the implications of the different methods used to model this phenomenon for interpreting the more recent experience are examined. The implicit dynamics of the equations estimated in error-correction form are derived and are discussed in terms of both employment and productivity behaviour.