Abstract
Production functions, where the number of workers, their average standard hours, and average overtime hours appear as separate inputs, are estimated using pooled data from Finnish industries. The results show that the returns to workers are higher than the returns to average hours and both returns are below one. This is in accordance with the assumption usually made in theoretical analyses of the demand for workers and hours. The productivity of overtime hours is slightly higher than that of standard hours. All the output elasticities are, however, fairly close to each other. Diagnostic tests show that there is collinearity between the explanatory variables, but application of several adaptive ridge estimators shows that this has not affected the results much.
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