Disentangling Labor Supply and Demand Shifts Using Spatial Wage Dispersion: The Case of Oil Price Shocks

Matthias Kehrig and Nicolas Vincent

Working Papers from U.S. Census Bureau, Center for Economic Studies

Abstract: We separate changes in labor supply and demand through changes in higher-order moments of the wage distribution. We illustrate this idea in a study of the effects of oil price shocks, which generate a predictable labor demand adjustment across regions. Empirically, oil price shocks decrease average wages, particularly skilled wages, and increase wage dispersion, particularly unskilled wage dispersion. In a model with spatial energy intensity differences and nontradables, labor demand shifts, while explaining the response of average wages to oil price shocks, have counterfactual implications for the response of wage dispersion. Only shifts in labor supply can explain this latter fact.

Keywords: Wage dispersion; Labor reallocation; Skill heterogeneity; Oil prices (search for similar items in EconPapers)
JEL-codes: E24 J24 J31 J61 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2013-11
New Economics Papers: this item is included in nep-ene, nep-lab, nep-lma and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:cen:wpaper:13-57

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