La sensibilité de l'emploi au coût du travail. Une exploration à partir de données de panel

François Legendre and Patricia Le Maitre

Economie & Prévision, 2001, vol. n° 150-151, issue 4, 1-11

Abstract: In this study, we present new evaluations of the sensitivity of labour demand to cost, based on a sample of nearly 800 French industrial firms tracked from 1980 to 1987. We explore a model of imperfect competition aimed at facilitating determination of the favourable impact of lower labour costs on employment. This is mainly achieved in two ways. The first is connected with substitution: a decrease in labour cost slows down the rate of capital/labour substitution. The second is connected with competitiveness because a decrease in labour costs is one way to lower unit production costs and so to improve competitiveness. The purpose of our econometrics experiment is to quantify the magnitude of these two effects. On the one hand, we show that capital and labour are two production factors that may be hard to substitute inside firms. This way, a 1% decrease in labour cost can boost employment on average by 0,1%. On the other hand, we find that the predominant effect would be on competitiveness. This way, a 1% decrease in labour cost can increase employment on average by 0,7%. However, this last effect is not certain and may be connected partly with a ?composition bias?.

Keywords: capital-labour substitution; link labour cost-employment; econometrics of panel data and heterogeneity (search for similar items in EconPapers)
Date: 2001
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