Elasticity Of Labor Demand Research Articles

Human capital quality and its impact on economic growth of Russian regions

Purpose: is to empirically substantiate the impact of human capital quality on the economic growth of the regions of Russia on the basis of theoretical and methodological generalization of its main aspects.Methods: along with traditional methods, specific methods were used, such as content analysis, methods of expert assessments and comparative analysis, and the calculation and graphic technique of Xiang-Yeaple, which allowed to identify the state of human capital quality, as well as establish its optimal structure suitable for dynamic economic development.Results: the cognitive and non-cognitive parameters of human potential are established as a realistic factor in the dynamics of gross regional product that determines the future pace of economic development. A comparative analysis of the labor demand and supply elasticity coefficients has revealed the degree of impact of its quality in ensuring the corresponding trends of economic growth. It was proven that significant investments in human capital and high levels of its development represent only a factor of ensuring economic growth and don’t guarantee its achievement. Recommendations for ensuring the development of labor potential as determinant of economic development, the growth rates of which largely depends on the human capital quality.Сonclusions and Relevance: the Russian economy should focus on the formation and development of high-quality human capital through talent-fueled innovation by reforming the existing education system and assessing scientific potential in order to optimize the labor and branch structure suitable for high-quality economic growth. Human capital should be structured considering the parameters of its quality, the level of available labor potential, and the types of activities that require advanced knowledge for systemic economic growth.

Income tax reductions in production networks

AbstractWe analytically characterize the comparative statics of the macroeconomy after income tax reductions in which production is organized in networks around the inefficient economy. We contribute to the literature by showing that in production networks, income taxes have different effects from revenue taxes which are assumed to be real distortions in the literature. The sectoral income tax reductions’ first-order effect on the GDP is given by a sufficient statistics: the product of the sectoral labor demand elasticity and sectoral Domar weight minus the sectoral labor share in the total labor supply, the latter of which is adjusted for labor supply elasticity if labor is elastic. We apply this model to quantify the effects of income tax reductions during the COVID-19 pandemic in the USA.

Who Benefits from State Corporate Tax Cuts? A Local Labor Markets Approach with Heterogeneous Firms: Comment

Suárez Serrato and Zidar (2016) identify state corporate tax incidence in a spatial equilibrium model with imperfectly mobile firms. Their identification argument rests on comparative statics omitting a channel implied by their model: the link between common determinants of a location’s attractiveness and the average idiosyncratic productivity of firms choosing that location. This compositional margin causes the labor demand elasticity to be independent from the product demand elasticity, impeding the identification of incidence from the four estimated reduced-form effects. Assigning consensual values to the unidentified parameters, we find that the incidence share borne by firm owners is closer to 25 percent than 40 percent. (JEL H22, H25, H32, H71, R23, R51)

The impact of trade on the elasticity of labor demand—Nonlinear analysis based on the perspective of human capital

Using the import and export trade data of 29 provinces and cities in China from 1997 to 2017, this paper studies the impact of trade on China’s labor demand elasticity, and whether the impact will be affected by the level of domestic human capital. The results show that: import is conducive to improving the labor demand elasticity, and export is conducive to reducing the labor demand elasticity. Moreover, with the improvement of domestic human capital level, the weakening effect of export on the labor demand elasticity is strengthened, and the improving effect of import on the labor demand elasticity is weakened. The reason is that the improvement of the level of human capital can reduce the demand elasticity of domestic and foreign consumers for domestic products by improving the cost performance of products, and can also reduce the factor substitution elasticity of labor force. Therefore, the improvement effect of import on the demand elasticity of labor force is weakened, and the weakening effect of export on the demand elasticity of labor force is strengthened. It can be seen that the improvement of domestic human capital level is conducive to the labor force to deal with the employment security problem in the trade liberalization.

Labor Demand Responses to Changing Gas Prices

Abstract In course of the current energy crisis, the consequences of increasing gas prices are heavily discussed. To date, however, there is no evidence of the impact of gas prices on the labor market. Using administrative employment data from 2012 to 2020, we find for manufacturing establishments a gas price elasticity of labor demand of −0.02, likely reflecting a scale effect. We also show that a rise in the gas price leads to an increase in establishment closure. A negative impact of the gas price on wages of 2 percent is consistent with rent-sharing.

How elastic is labor demand? A meta-analysis for the German labor market

The own-wage elasticity of labor demand measures the effect of higher wages on firms’ demand for labor and, thus, determines the impact of supply shocks, minimum wages, and collective wage agreements on the labor market. I carry out a comprehensive meta-analysis to shed light on the nature of this parameter, leveraging 705 elasticity estimates from 105 studies on the German labor market. The average elasticity is −0.43, but entails important heterogeneity: Labor demand turns out particularly elastic for low- and high-skilled workers, in the long run, and for internationally operating firms. While empirical designs that address endogeneity deliver more negative elasticities, the analysis does not support any systematic differences by region or by margin of adjustment.

Does Automatic Wage Indexation Destroy Jobs? A Machine Learning Approach.

This paper analyzes the impact of automatic wage indexation on employment. To boost competitiveness and increase employment, Belgium suspended its automatic wage indexation system in 2015. This resulted in a 2% fall in real wages for all workers. In the absence of a suitable control group, we use machine learning for the counterfactual analysis. We artificially construct the control group for a difference-in-difference analysis based on the pre-treatment evolution of treated firms. We find a positive impact on employment of 1.2%, which corresponds to a labor demand elasticity of - 0.6. This effect is more pronounced for manufacturing firms, where the elasticity reaches - 1. These results show that a suspension of the automatic wage indexation mechanism can be effective in preserving employment.

Towards a Model of Contractualisation of Labour in India: Testing the Effect of Unionisation of Regular Workers and the Wage Gap

When manufacturing firms employed labour on a low-wage contract in big numbers during the post-reform in India, the demand for cheap contract labourers increased and contract labourers were prepared to work for lower wages as they were not unionised and could not bargain for higher wages. So, have regular workers tried to organise their contractual counterparts so that latter could negotiate higher wages? By helping contract labourers, have regular workers lost the premium wages that they were able to negotiate? In this article, I used wages of regular workers and contract labourers and the wage gap between the two groups to come up with a framework for understanding why contract labourers continued to help firms in India’s manufacturing sector as well by not moving the elasticity of labour demand and demand of substitution of labour upward concerning all other inputs to the production during the post-liberalisation era. I posit four different scenarios to speculate how improved labour flexibility made one of the two sections of workers prosper at the cost of the other section’s hardships.

Trade Liberalisation and Labour Demand Elasticities: Empirical Evidence for Pakistan

Trade has predominantly contributed in the development of world economies for more than mere agricultural development and industrialisation. Trade involves many regions across the globe. The more the regions involved, the more will be the benefits. Trade is an interaction between economies for the exchange of goods, services, skills, knowledge and expertise, which is required for bringing in the desired changes like increase in the availability of choices, reduction of extreme poverty, and enhancement of physical and mental capability. As the wave of market oriented moves has spread over the economic sphere, global trend has also been witnessed in the liberalisation of capital account, foreign exchange, credit, domestic consumption and trading sector of many countries. The concept, which has been predominantly emphasised by the economies, is that of “trade liberalisation”, which has become the key element of any development policy since late 1970s after the fundamental change in the economic policy at global level. The concept of trade liberalisation stems from Neo-liberalism thinking that has advocated market oriented economic reforms for social order and economic prosperity that aims to improve efficiency and stability in the economy. Trade liberalisation process can be defined in many different ways. In the words of Krueger (1978), “any policy, which reduces the anti export bias will lead towards liberalisation of trade and reduction in import license premium is the fundamental step towards liberalised trade regime”.

The impact of trade policy uncertainty on labour demand elasticity: evidence from China

ABSTRACT Research on the effect of trade on labour demand elasticity is rich, but lacks studies on the effect of trade policy uncertainty. Using firm-level labour demand elasticity data from China, this paper supplements current research by presenting evidence for the impact of trade policy uncertainty on labour demand elasticity. Using the granting Permanent Normal Trade Relations (PNTR) status by the US to China as a quasi-natural experiment, this paper constructs a difference-in-differences model. The empirical results show that a reduction in trade policy uncertainty following the grant of PNTR status significantly reduces labour demand elasticity in China. The decrease in trade policy uncertainty thereby improves employment stability. This paper reveals the importance of cultivating a stable international trade policy environment for stabilizing the domestic job market.

Immigration and Offshoring: two forces of globalisation and their impact on employment and the bargaining power of occupational groups

This paper estimates conditional demand models to examine the impact of immigration and different measures of offshoring on the labour demand and demand elasticities of native workers in four different types of occupational groups: managers/professionals, clerical workers, craft (skilled) workers and manual workers. The analysis is conducted for the period 2008–2017 for four economies Austria, Belgium, France and Spain. Our results point to important and occupation-specific direct and indirect effects: both offshoring – particularly services offshoring – and immigration have negative direct employment effects on all occupations, but native clerks and manual workers are affected the most, and native managers/professionals the least. Our results also identify an important elasticity-channel of immigration and offshoring and show that some groups of native workers can also gain from globalisation through an improvement in their wage-bargaining position. Overall, our results indicate a deterioration in the bargaining power of native manual workers arising from both immigration and offshoring and an improvement in the bargaining position of native craft workers.

Moderate wage increases and flexible labour contracts to protect employment in Colombian manufacturing

Based on conditional and unconditional demands for labour, we exploit the variations of real minimum wage across manufacturing subsectors to present evidence that this variable affects formal employment. The long-term elasticity of labour demand to the minimum wage is around –0.7. Accordingly, increases in the minimum wage lead to job losses for unskilled labour, mainly in plants with fewer than 100; thus, small increases in the minimum wage are desirable to protect employment. Labour demand is highly cyclical: the output elasticity is about 1.7. Thus, some flexibility in labour contracts is desirable to reduce the link between employment and variation of plants’ sales. Open-ended labour contracts might allow reductions of the nominal wage rather than inducing job losses during periods of severe slumps, as has happened during the COVID-19 pandemic.

РЫНОК ТРУДА И ВНЕЭКОНОМИЧЕСКИЕ ШОКИ

The object of the study is the transformation of the Russian labor market. The aim of the work is to assess the quantitative and qualitative consequences of non-economic crises for the Russian labor market. The relevance of the study is due to the need for both retrospective analysis and short-term forecast estimates of changes in the most important parameters of the Russian labor market under the influence of external shocks. The novelty of the research consists in the application of the author's approaches to obtaining factor forecast estimates of changes in the number of employed and unemployed in the economy in 2022 under the influence of restrictions imposed on the country on foreign economic activity. One of them is based on estimates of the elasticity of labor demand in relation to changes in the most important macro parameters, the other is based on estimates of the impact of the effects of reduced imports and disruption of production chains on industry output parameters. The research methods are analysis, economic and mathematical modeling based on the balanced approach, and the RAS method. The findings of the study show that due to the sanctions regime, the potential demand for labor in the economy may decrease by 6.4-6.7 million jobs (employed). However, large-scale government support measures can save about 5 million jobs. In this regard, it is justified that as a result of sanctions, a sharp surge in the number of unemployed should not be expected. A number of factors are also considered that can support the demand for domestic labor in the medium term, namely the intensification of the import substitution policy and the deterioration of the position of foreign labor migrants in the Russian labor market. The article also analyzes the change in industry and qualification (by type of occupation) employment structures under the influence of the coronavirus pandemic. Despite minor changes in the overall industry and qualification structure of employment in 2021 compared with the pre-pandemic 2019, a number of significant changes were noted in the qualification structure of the use of labor within industries. The author draws a conclusion about the effectiveness of economic policy measures aimed at supporting the economy and the labor market and also defines the main directions of transformation of the employment structure in non-economic crises

Market power and artificial intelligence work on online labour markets

We investigate three alternative but complementary indicators of market power on one of the largest online labour markets (OLMs) in Europe: (1) the elasticity of labour demand, (2) the elasticity of labour supply, and (3) the concentration of market shares. We explore how these indicators relate to an exogenous change in platform policy. In the middle of the observation period, the platform made it mandatory for employers to signal the rates they were willing to pay as given by the level of experience required to perform a project, i.e., entry, intermediate or expert level. We find a positive labour supply elasticity ranging between 0.06 and 0.15, which is higher for expert-level projects. We also find that the labour demand elasticity increased while the labour supply elasticity decreased after the policy change. Based on this, we argue that market-designing platform providers can influence the labour demand and supply elasticities on OLMs with the terms and conditions they set for the platform. We also explore the demand for and supply of AI-related labour on the OLM under study. We provide evidence for a significantly higher demand for AI-related labour (ranging from +1.4% to +4.1%) and a significantly lower supply of AI-related labour (ranging from -6.8% to -1.6%) than for other types of labour. We also find that workers on AI projects receive 3.0%-3.2% higher wages than workers on non-AI projects.

Trade Liberalization and Labor Demand Elasticities: A Firm-Level Analysis of Pakistan’s Manufacturing Sector

The study investigates the linkage of trade liberalization and labor demand elasticities in Pakistan. The panel data are used by selecting 13 industries in Pakistan's manufacturing sector for the years 1995-1996, 2000-2001, and 2005-2006. The Pooled OLS technique is applied to get the estimates at an aggregated level and disaggregated levels. Overall findings support the positive relationship between trade liberalization and labor demand elasticity in production workers but in the case of non-production workers, the findings show the weak relationship between trade liberalization and labor demand elasticity. The study is also furnished with some policy recommendations.

Who Benefits from Online Gig Economy Platforms?

This paper estimates the magnitude and distribution of surplus from the knowledge worker gig economy using data from an online labor market. Labor demand elasticities determine workers’ wages, and buyers’ past market experience shapes both their job posting frequency and hiring rates. We find that workers on the supply side capture around 40% of the surplus from filled jobs. Under counterfactual policies that resemble traditional employment regulation, buyers post fewer online jobs and fill posted jobs less often, reducing expected surplus for all market participants. We find negligible substitution on the demand side between online and offline jobs by assessing how changes in local offline minimum wages affect online hiring. The results suggest that neither online or offline knowledge workers will benefit from applying traditional employment regulation to the online gig economy. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Who Benefits from State Corporate Tax Cuts? A Local Labor Markets Approach with Heterogeneous Firms: Comment

Suarez Serrato and Zidar (2016) identify state corporate tax incidence in a spatial equilibrium model with imperfectly mobile firms. Their identification argument rests on comparative-statics omitting a channel implied by their model: the link between common determinants of a location's attractiveness and the average idiosyncratic productivity of firms choosing that location. This compositional margin causes the labor demand elasticity to be independent from the product demand elasticity, impeding the identification of incidence from the four estimated reduced-form effects. Assigning consensual values to the unidentified parameters, we find that the incidence share born by firm-owners is closer to 25% than 40%.

Firm’s globalization and wage elasticity of labour demand in South Korea

ABSTRACT This study investigates the effects of exports and overseas investments on the wage elasticity of labour demand for both foreign multinational corporations (MNCs) and Korean MNCs using a 2006–2015 firm-level unbalanced panel dataset from South Korea. I employ the system generalized method of moments to estimate a dynamic labour demand function to solve the problem of reverse causality due to potential endogeneity. The results suggest that exports play a critical role in increasing wage elasticity among foreign MNCs, whereas overseas investments render labour demand more elastic among both foreign MNCs and Korean MNCs. Particularly, these effects of globalization on increasing wage elasticity became strengthened among foreign MNCs during the post-financial crisis period. Moreover, the intra-firm and inter-firm exports of foreign MNCs from OECD nations, which reflect the vertical integration of foreign MNCs with their affiliated firms, increase the wage elasticity of labour demand. Since overseas investments induce higher wage elasticity of labour demand, overseas investment substitutes for local production activity. These empirical results imply that the rapid pace of globalization exacerbates the instability of the local labour market, and the aggravation of employment vulnerability during the post-crisis period is driven by foreign MNC activity.

Globalization and labor demand elasticities: Do trading partners matter

This paper uses industrial level data across 41 developing and emerging economies over the period of 1993–2013, to analyze the impact of globalization on the elasticity of demand for labor. The use of both import penetration ratios and export intensity in our model allows for assessment of relative effectiveness of exports vis à vis imports in influencing the labor elasticities. Furthermore, the disintegration of exports and imports according to their trading partners helps explore a novel source of heterogeneity in labor elasticity originating as a result of trading relationship with developed and developing world. Using system-GMM approach, our results reveal that both exports and imports make labor demand more elastic, with imports leaving the labor demand more vulnerable to wage changes. Trading with developing countries renders labor demand more elastic and that too with respect to low-tech or labor intensive products, while trading with developed countries poses no effect. Overall, the results point towards developing countries encouraging greater exporting and importing ties with developed world to ease its impact on the elasticity of demand for labor. However, trading with developing countries need not be suspended rather labor protection programs need to be in place to counter any consequent adverse effects.

Factors And Principles Of Fair Pay

The article covers the issues of factors influencing the formation of fair wages. The principles on which the system of guarantees of realization of the rights of workers to a fair wage should be based are considered. There are two groups of factors in the formation of wages: a) market; b) non-market or socio-legal. The first group includes:
 1) changes in supply and demand in the market of goods and services in the production of which this work is used; 2) the usefulness of the resource of the entrepreneur; 3) the elasticity of demand for labor at price; 4) interchangeability of resources; 5) change in prices for consumer goods and services. The second group includes: 1) measures of state regulation related to the establishment of the minimum wage, minimum salary, subsistence level; 2) the level of wages and conditions of employment can have a significant impact on trade union policy, the strength of the trade union movement;
 3) the final results of the enterprise and the personal contribution of the employee;
 4) the existence of a system of guarantees for the realization of employees’ rights to fair remuneration. It is pointed out that we cannot study the institution of wages in isolation from the current economic situation in the country, so we need to know what factors affect the determination of the level of wages.
 There are four principles on which the system of guarantees for the realization of employees’ rights to fair remuneration should be based: 1) equality of remuneration;
 2) timeliness of remuneration; 3) completeness of payment of wages; 4) fair pay.
 It is concluded that the proposed and analyzed factors that affect the formation of wages should be studied and taken into account during the regulatory reform of the institution of wages.
 In our opinion, the principles on which the system of guarantees for the realization of workers’ rights to fair remuneration should be based must be enshrined in law. It is argued that the institution of wages needs comprehensive reform. And above all, it is necessary to pay attention to the principles on which it should be built, because these are the fundamental foundations.