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In Search of Labor Demand

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  • Paul Beaudry
  • David A. Green
  • Benjamin M. Sand

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

  • Paul Beaudry & David A. Green & Benjamin M. Sand, 2014. "In Search of Labor Demand," NBER Working Papers 20568, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:20568
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    References listed on IDEAS

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    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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