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

Author

Listed:
  • Addison, John T.

    (Durham University Business School)

  • Portugal, Pedro

    (Banco de Portugal)

  • Varejão, José

    (University of Porto)

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.

Suggested Citation

  • Addison, John T. & Portugal, Pedro & Varejão, José, 2014. "Labour Demand Research: Towards a Better Match between Better Theory and Better Data," IZA Discussion Papers 8125, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp8125
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    8. Pedro S. Martins, 2016. "The third worker: Assessing the trade-off between employees and contractors," Working Papers 75, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
    9. Andreas Peichl & Martin Popp, 2022. "Can the Labor Demand Curve Explain Job Polarization?," CESifo Working Paper Series 9799, CESifo.
    10. Pedro Portugal, 2015. "On fallacies surrounding the discussion about the reduction of social security contributions," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.
    11. Gugler, Klaus & Weichselbaumer, Michael & Zulehner, Christine, 2020. "Employment behavior and the economic crisis: Evidence from winners and runners-up in procurement auctions," Journal of Public Economics, Elsevier, vol. 182(C).
    12. Kölling, Arnd, 2018. "It's not about adjustment costs: Estimating asymmetries in long-run labor demand using a fractional panel probit model," Working Papers 95, Berlin School of Economics and Law, Institute of Management Berlin (IMB).
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    More about this item

    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;
    All these keywords.

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J4 - Labor and Demographic Economics - - Particular Labor Markets
    • J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • F66 - International Economics - - Economic Impacts of Globalization - - - Labor

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