Industry-Level Labour Demand Elasticities Across the Eurozone: Will There Be Any Gain after the Pain of Internal Devaluation?

38 Pages Posted: 9 Jul 2014

See all articles by Antonis Adam

Antonis Adam

University of Ioannina - Department of Economics

Thomas Moutos

Athens University of Economics and Business - Department of International and European Economic Studies; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

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Date Written: June 25, 2014

Abstract

In this paper we estimate disaggregated labour demand equations using panel data involving observations across time (1970-2007) for twenty-three industries across eleven Euro area countries. By using the EU KLEMS database, which provides data across countries, we provide industry-by-industry estimates of the labour demand function. The values of our estimated (own-price) elasticities of labour demand are substantial, and in accordance with the findings of the empirical literature. Independently of whether we use level or time-differenced data, the (absolute value of the) estimated conditional elasticities are bracketed in the interval [0.05, 0.80], with the (un-weighted) mean elasticity across the various methods ranging from 0.26 to 0.43. The values of the estimated unconditional elasticities are similar in size and range, and the same holds true for country-specific wage-elasticities of labour demand. Our results indicate that the experienced wage declines in the periphery countries of the euro area can, when the contractionary credit and budgetary policies come to an end, have a non-negligible, albeit modest, effect on future employment growth.

Keywords: labour demand, wages, international trade, Euro area

JEL Classification: F16, J23

Suggested Citation

Adam, Antonis and Moutos, Thomas, Industry-Level Labour Demand Elasticities Across the Eurozone: Will There Be Any Gain after the Pain of Internal Devaluation? (June 25, 2014). CESifo Working Paper Series No. 4858, Available at SSRN: https://ssrn.com/abstract=2463591 or http://dx.doi.org/10.2139/ssrn.2463591

Antonis Adam

University of Ioannina - Department of Economics ( email )

45110 Ioannina
Greece
(+30)2651097437 (Phone)

HOME PAGE: http://users.uoi.gr/aadam

Thomas Moutos (Contact Author)

Athens University of Economics and Business - Department of International and European Economic Studies ( email )

76 Patission Street
GR-10434 Athens
Greece

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

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