Employment and Deadweight Loss Effects of Observed Non-Wage Labor Costs

Silvio Rendon and Giovanna Aguilar Andía ()

No 704, Working Papers from Centro de Investigacion Economica, ITAM

Abstract: To assess the employment effects of labor costs it is crucial to have reliable estimates of the labor cost elasticity of labor demand. Using a matched firm-worker dataset, we estimate a long run unconditional labor demand function, exploiting information on workers to correct for endogeneity in the determination of wages. We evaluate the employment and deadweight loss effects of observed employers' contributions imposed by labor laws (health insurance, training, and taxes) as well as of observed workers' deductions (social security, and income tax). We find that non-wage labor costs reduce employment by 17% for white-collars and by 53% for blue-collars, with associated deadweight losses of 10% and 35% of total contributions, respectively. Since most firms undercomply with mandated employers' and workers contributions, we find that full compliance would imply employment losses of 4% for white-collars and 12% for blue-collars, with respective associated deadweight losses of 2% and 6%.

Keywords: Employment; Deadweight Loss; Job Creation; Labor Costs; Labor Law (search for similar items in EconPapers)
JEL-codes: J23 J32 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2007-06
New Economics Papers: this item is included in nep-lab
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://ftp.itam.mx/pub/academico/inves/rendon/07-04.pdf First version, 2007 (application/pdf)

Related works:
Journal Article: EMPLOYMENT AND DEADWEIGHT LOSS EFFECTS OF OBSERVED NONWAGE LABOR COSTS (2010)
Working Paper: Employment and Deadweight Loss Effects of Observed Non-Wage Labor Costs (2007)
Working Paper: Employment and deadweight loss effects of observed non-wage labor costs (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cie:wpaper:0704

Access Statistics for this paper

More papers in Working Papers from Centro de Investigacion Economica, ITAM Contact information at EDIRC.
Bibliographic data for series maintained by Diego Dominguez ().