Accounting Labor Market Equilibrium: Explaining and Predicting Changes in Accounting Labor Demand and Supply

Abstract

Price and unit demand for accounting labor, and for accounting education, declined during the 1990s. Statements by both academics and practitioners nonetheless suggest accounting knowledge has become more valuable over time, and that the accounting labor market is in disequilibrium. Policy interventions have been proposed to correct the ostensible imbalance in accounting labor supply and demand. We develop a general equilibrium model of the accounting labor market to explore such issues. Empirical data from 1990-1997 is used to calibrate parameter values of the model, and such values are generally consistent with accounting labor market equilibrium. Inferences to the contrary may derive from the failure to recognize that accounting knowledge is complementary with other types of knowledge in producing business information. Examination of the model and calibration results suggests complementarities between accounting and other types of knowledge in the business and information disciplines have important implications for business education policy and curricula, as well as for regulation of the accounting profession.

Keywords: Equilibrium, labor, human capital production, accounting

JEL Classification: M40, M44, J44