The Impact of Labour Demand Shocks when Occupational Labour Supplies are Heterogeneous

Michael Johannes Böhm (), Ben Etheridge () and Aitor Irastorza-Fadrique ()
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Michael Johannes Böhm: TU Dortmund
Ben Etheridge: University of Essex
Aitor Irastorza-Fadrique: Institute for Fiscal Studies, London

No 17851, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: As technological advances accelerate and labour demands shift, the ability of workers to reallocate across occupations will be crucial for shaping labour market dynamics, inequality, and effective policy design. In this paper, we develop a tractable equilibrium model of the labour market that incorporates heterogeneous labour supply elasticities to different occupations and across different occupation pairs. Using worker flows from German administrative data, we estimate these elasticities and validate them through external measures such as occupational licensing and task distance. Our model quantifies the heterogeneous impacts of recent labour demand shifts on occupational wages and employment, highlighting the role of cross-occupation effects in shaping market responses to shocks. Finally, we leverage this framework to project employment flows and wage adjustments under future occupational demand shifts that are implied by the latest automation technologies.

Keywords: labour demand shocks; occupational substitutability; future projections; heterogeneous labour supply elasticities; automation technologies; german panel data; job flows; occupational employment and wages; automation technologies; future projections (search for similar items in EconPapers)
JEL-codes: J21 J23 J24 J31 (search for similar items in EconPapers)
Date: 2025-04
New Economics Papers: this item is included in nep-lma and nep-tid
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