Testing Theories of Job Creation: Does Supply Create its Own Demand?
CESifo Working Paper Series No. 1866
Riksbank Research Paper Series No. 27
Sveriges Riksbank Working Paper No. 194
26 Pages Posted: 10 Mar 2006
Date Written: December 2006
Abstract
Search-matching theory has come to dominate labor economics in recent years, but few attempts have been made to compare the empirical relevance of search-matching theory to efficiency wage and bargaining theories, where employment is determined by labor demand. In this paper we formulate an empirical equation for net job creation, which encompasses search-matching theory and a standard labor demand model. Estimation on firm-level data yields support for the labor demand model. Wages and product demand affect job creation. We find no evidence that unemployed workers contribute to job creation, as predicted by search-matching theory.
Keywords: Job Creation, Involuntary Unemployment, Search-Matching, Labor Demand, Competitiveness
JEL Classification: E24, J23, J64
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
The Chinese Approach to Capital Inflows: Patterns and Possible Explanations
By Eswar S. Prasad and Shang-jin Wei
-
The Chinese Approach to Capital Inflows: Patterns and Possible Explanations
By Eswar S. Prasad and Shang-jin Wei
-
By Eswar S. Prasad, Thomas Rumbaugh, ...
-
The Impact of Tax Morale and Institutional Quality on the Shadow Economy
By Benno Torgler and Friedrich Schneider
-
The Overvaluation of Renminbi Undervaluation
By Yin-wong Cheung, Menzie David Chinn, ...
-
The Overvaluation of Renminbi Undervaluation
By Yin-wong Cheung, Menzie David Chinn, ...
-
Assessing China's Exchange Rate Regime
By Jeffrey A. Frankel and Shang-jin Wei