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Labour Demand Research: Towards a Better Match between Better Theory and Better Data

John Addison (), Pedro Portugal and Jose Varejao ()

No 8125, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: At first blush, most advances in labour demand were achieved by the late 1980s. Since then progress might appear to have stalled. We argue to the contrary that significant progress has been made in understanding labour market frictions and imperfections, and in modelling search behaviour and heterogeneous preferences. Perhaps most notable have been the improvements in data, in the form of longitudinal matched employer-employee data, and in techniques and algorithms (e.g. for solving heterogeneous parameter models). In short, the Cinderella status of the field is frankly overdrawn. Nevertheless, a chief lacuna remains the need for a better match between theory and data. This paper provides a critical albeit eclectic assessment of these developments, along the dimensions of the static and dynamic theory of labour demand, wage formation, and estimation, noting advances and limitations. As is conventional, somewhat greater emphasis is placed on the latter.

Keywords: multiple fixed effects; product and labour market imperfections; wage and employment determination; labour adjustment costs; input heterogeneity; labour demand; exogenous wages; establishment-level functions (search for similar items in EconPapers)
JEL-codes: J23 J3 J4 J5 D4 F66 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2014-04
New Economics Papers: this item is included in nep-lab
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Citations: View citations in EconPapers (7) Track citations by RSS feed

Published in: Labour Economics, 2014, 30, 4-11

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Journal Article: Labor demand research: Toward a better match between better theory and better data (2014) Downloads
Working Paper: Labour Demand Research: Towards a Better Match between Better Theory and Better Data (2014) Downloads
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