To pool or to aggregate? Tests with a dynamic panel macroeconometric model of Australian state labour markets

Kausik Chaudhuri; Jeffery R. Sheen

doi:10.2202/1935-1690.1365

To pool or to aggregate? Tests with a dynamic panel macroeconometric model of Australian state labour markets

Kausik Chaudhuri, Jeffery R. Sheen

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Abstract

We construct a dynamic error correction model of the Australian labor market using a macroeconomic panel across seven states from 1972:3 to 1999:1. Medium-run equilibrium estimates support a real wage-productivity gap and an unemployment gap. The dynamic short-run estimates support expectations-augmented Phillips curves for wages and prices, and demand-led employment growth. We compare three procedures – pooled, aggregate and mean group estimates. Considerable heterogeneity existed across states in the pooled procedure, and state-level variables had a significant impact in the aggregate procedure. Out-of-sample aggregate forecasting for the pooled, aggregate and mean group procedures suggests that the pooled one performs best.

Original language	English
Article number	1
Number of pages	37
Journal	The B. E. journal of macroeconomics
Volume	7
Issue number	1
DOIs	https://doi.org/10.2202/1935-1690.1365
Publication status	Published - 2007
Externally published	Yes

Bibliographical note

Copyright 2007 The Berkeley Electronic Press. Version archived for private and non-commercial use with the permission of the author/s and according to publisher conditions. For further rights please contact the publisher.

Keywords

panel cointegration
panel macroeconometric modeling
Australian state labor markets
aggregation

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10.2202/1935-1690.1365

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To pool or to aggregate? Tests with a dynamic panel macroeconometric model of Australian state labour markets

Abstract

Bibliographical note

Keywords

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