In Search of Labor Demand

Paul Beaudry, David Green and Benjamin Sand ()

American Economic Review, 2018, vol. 108, issue 9, 2714-57

Abstract: We propose and estimate a novel specification of labor demand which encompasses search frictions and the role of entrepreneurs in new firm creation. Using city-industry variation over four decades, we estimate the wage elasticity of employment demand to be close to -1 at the industry-city level and -0.3 at the city level. We argue that the difference between these estimates reflects the congestion externalities predicted by the search literature. Our estimates also indicate that entrepreneurship should be treated as a scarce factor in the determination of labor demand. We use our estimates to evaluate the impact of large changes in the minimum wage on employment.

JEL-codes: J23 J31 J38 L26 M13 R23 (search for similar items in EconPapers)
Date: 2018
Note: DOI: 10.1257/aer.20141374
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Citations: View citations in EconPapers (20)

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Working Paper: In Search of Labor Demand (2014)
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