Input Demand and the Short- and Long-Run Employment Thresholds an Empirical Analysis for the German Manufacturing Sector
19 Pages Posted: 4 Apr 2001
Date Written: March 2000
The concept of the "employment thresholdin the public discussion of unemployment. The employment threshold is defined as that growth rate of output which is necessary to keep employment constant despite the continuous rise in labour productivity. It is related to the Okun coefficient which describes the relationship between the changes of output and unemployment. Many contributions to this debate give the impression that the employment threshold is more or less a structural characteristic which remains constant over time. In this paper we derive short- and long-run employment thresholds from an input demand system and show empirically that they depend on factor prices. A moderate wage policy leads to a reduction of the output growth which is necessary for an increase in employment.
JEL Classification: D24, E24, L60
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