Business Sector Employment

Supply- and demand-side influences are incorporated within MM’s dynamic (reduced form) equation for business sector employment E_B. Other things equal, the rate of growth of employment in this sector equals the medium-run (smoothed) rate of growth of the workforce, plus a term proportional to the gap one quarter ago between desired (i.e., medium-run equilibrium) employment and actual employment. The constant of proportionality, α₂10, is a coefficient to be estimated. Thus (12.1.1)$${{i,j = 1}}^{n} {{{a}_{{ij}}}\left( x \right){{\xi }_{i}}{{\xi }_{j}}} $$.