Testing Theories of Job Creation: Does Supply Create Its Own Demand?

Mikael Carlsson, Stefan Eriksson and Nils Gottfries ()

No 2024, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: How well do alternative labor market theories explain variations in net job creation? According to search-matching theory, job creation in a firm should depend on the availability of workers (unemployment) and on the number of job openings in other firms (congestion). According to efficiency wage and bargaining theory, wages are set above the market clearing level and employment is determined by labor demand. To compare models, we estimate an encompassing equation for net job creation on firm-level data. The results support demand-oriented theories of job creation, whereas we find no evidence in favor of the search-matching theory.

Keywords: involuntary unemployment; job creation; search-matching; labor demand (search for similar items in EconPapers)
JEL-codes: E24 J23 J64 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2006-03
New Economics Papers: this item is included in nep-lab and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Published - revised version published as 'Product market imperfections and employment dynamics' in: Oxford Economic Papers, 2013, 65 (2), 447-470

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Related works:
Working Paper: Testing Theories of Job Creation: Does Supply Create Its Own Demand? (2008)
Working Paper: Testing Theories of Job Creation: Does Supply Create Its Own Demand? (2006)
Working Paper: Testing Theories of Job Creation: Does Supply Create Its Own Demand? (2006)
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