Real Wages, Investment and Employment - New Evidence From West German Sectoral Data

Felix Fitzroy and Michael Funke

CRIEFF Discussion Papers from Centre for Research into Industry, Enterprise, Finance and the Firm

Abstract: Non-Separable capital adjustment costs imply that investment directly affects the demand for labour and therefore justify not only the lagged dependent variable but also the presence of investment expenditures or Tobin's valuation ratio Q in labour demand estimation. On this basis we estimate a very parsimonious specification of demand for blue-collar workers in a panel of 32 west German industries, conditional on value added and common macroeffects. We find much larger short-run real wage employment elasticities than previous work, and robustly significant positive effects of investment or Tobin's Q on labour demand.

Date: 1993-10
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Journal Article: Real wages, investment and employment: New evidence from West German sectoral data (1994)
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Persistent link: https://EconPapers.repec.org/RePEc:san:crieff:9305

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