A Closer Literature Review Sample Clauses

A Closer Literature Review. ‌ Among the works cited above, Xxxxx and Hong (2006) conduct one of the most extensive disaggregated analyses of the topic at hand. As stated earlier, they utilize data on 458 4-digit level manufacturing industries categorized under the Standard Industrial Classifica- tion (SIC). This data covers the time period 1958 − 1996. They further aggregate the data to both the 3-digit and 2-digit levels. Methodologically, they perform a bivariate SVAR, using long-run restrictions, to study the short-run response of hours worked to a positive TFP shock. They find that the number of positive short-run responses exceeds that of negative responses at all three industry-classification levels. For comparison, they also use labor productivity instead of TFP, and obtain more negative responses. However, they pro- fess TFP to be the most natural measure to use since labor productivity reflects input mix and efficiency, and therefore conclude that technology shocks are pro-cyclical with respect to hours worked. As a benchmark for my results, I adopt Xxxxx and Hong’s bivariate SVAR consisting of labor productivity and hours for all industries. While acknowledging their argument for the use of TFP, I gather that using labor productivity provides for better policy implications2. I utilize the same US manufacturing database but my variables for output and hours slightly differ, with justification, from Xxxxx and Hong’s. Firstly, while they use total worker 2Appendix A in Xxxxx and Xxxxxxxx (2012) presents a complete account on the use of labor productivity versus TFP. hours I use production-worker hours. Dars and Gujarati (1972) asserts that production- worker wages in the short-run are considered variable costs whereas non-production worker wages are overhead or fixed costs. This implies that short-run employment of production- workers is directly related to output whereas that of non-production workers is only loosely so. Consequently, using production-worker hours is more fitting as it ensures a relatively greater short-run responsiveness of employment to productivity changes. Secondly, instead of gross output I use value-added output to compute labor productivity. This is because the database uses sales (value of shipments) as a proxy for output, and gross sales do not account for material purchases. As a result, an industry’s large sales value could merely be reflective of high costs of intermediate inputs instead of actual internal production. The use of value-added output...
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