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TFP, Labor Productivity and the (Un)observed Labor Input: Temporary Agency Work

Discussion Papers 1532, 46 S.

Alexander Schiersch


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The study focuses on the question of whether productivity estimates are biased due to the emergence of a new input that is usually omitted: temporary agency worker (TAW). The study analyzes labor productivity and TFP by means of a structural approach using a representative dataset of German manufacturing firms. The empirical results show, once TAW is taken into account, that: i) labor productivity in most manufacturing sectors is significantly lower; ii) average TFP differs significantly in most sectors; but iii) the coefficients for regular labor are not significantly different between estimations with and without TAW.

Alexander Schiersch

Research Associate in the Firms and Markets Department

JEL-Classification: D24;J24;L24;L60
Keywords: Temporary agency work, total factor productivity, labor productivity, omitted variable bias, structural productivity estimation
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