In Search of Labor Demand

44 Pages Posted: 14 Oct 2014 Last revised: 15 Mar 2023

See all articles by Paul Beaudry

Paul Beaudry

University of British Columbia (UBC) - Vancouver School of Economics; National Bureau of Economic Research (NBER)

David A. Green

University of British Columbia (UBC) - Department of Economics

Benjamin Sand

University of British Columbia (UBC) - Department of Economics

Date Written: October 2014

Abstract

We propose and estimate a novel specification of the labor demand curve incorporating search frictions and the role of entrepreneurs in new firm creation. Using city-industry variation over four decades, we estimate the employment - wage elasticity to be -1 at the industry-city level and -0.3 at the city level. We show that the difference between these estimates likely reflects the congestion externalities predicted by the search literature. Also, holding wages constant, an increase in the local population is associated with a proportional increase in employment. These results provide indirect information about the elasticity of job creation to changes in profits.

Suggested Citation

Beaudry, Paul and Green, David Alan and Sand, Benjamin M., In Search of Labor Demand (October 2014). NBER Working Paper No. w20568, Available at SSRN: https://ssrn.com/abstract=2510065

Paul Beaudry (Contact Author)

University of British Columbia (UBC) - Vancouver School of Economics ( email )

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Canada

National Bureau of Economic Research (NBER)

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David Alan Green

University of British Columbia (UBC) - Department of Economics ( email )

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Canada
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604-822-5915 (Fax)

Benjamin M. Sand

University of British Columbia (UBC) - Department of Economics ( email )

997-1873 East Mall
Vancouver, BC V6T 1Z1
Canada

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