Abstract
The paper is concerned with the estimation of labour demand. The model is generalized to incorporate a variane function. A flexible translog functional form is used where the demand labour is a function of wages, outputs, quasi-fixed inputs and a time variable. The variance function appears multiplicatively with the demand function and it accommodates both positive and negative marginal effects with repect to the determinants of employment. The model includes features of the usual panel data models. A multi-step procedure is used to estimate the parameters of the model. Focus is on the estimation of productivity and efficiency of labour in Swedish savings banks. The labour productivity and afficiency in defined in terms of a shift in the labour demand over time and the bank’s distance from the labour demand frontier, respectively. Empirical resuls show that the average labour efficiency is about 96%.