Employment And Deadweight Loss Effects Of Observed Nonwage Labor Costs
Abstract"To assess the employment effects of labor costs, it is crucial to have reliable estimates of the labor cost elasticity of labor demand. Using a matched firm-worker data set, we estimate a long-run unconditional labor demand function, exploiting information on workers to correct for endogeneity in the determination of wages. We evaluate the employment and deadweight loss effects of observed employers' contributions imposed by labor laws (health insurance, training, and taxes) as well as of observed workers' deductions (social security and income tax). We find that nonwage labor costs reduce employment by 17% for white collars and by 53% for blue collars, with associated deadweight losses of 10% and 35% of total contributions, respectively. Since most firms undercomply with mandated employers' and workers' contributions, we find that full compliance would imply employment losses of 4% for white collars and 12% for blue collars, with respective associated deadweight losses of 2% and 6%." ("JEL" J23, J32) Copyright (c) 2009 Western Economic Association International.
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Bibliographic InfoArticle provided by Western Economic Association International in its journal Economic Inquiry.
Volume (Year): 48 (2010)
Issue (Month): 3 (07)
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Other versions of this item:
- Aguilar, Giovanna & Rendon, Silvio, 2007. "Employment and Deadweight Loss Effects of Observed Non-Wage Labor Costs," IZA Discussion Papers 2856, Institute for the Study of Labor (IZA).
- Silvio Rendon & Giovanna Aguilar, 2007. "Employment and Deadweight Loss Effects of Observed Non-Wage Labor Costs," Working Papers 0704, Centro de Investigacion Economica, ITAM.
- Giovanna Aguilar & Silvio Rendon, 2007. "Employment and deadweight loss effects of observed non-wage labor costs," Documentos de Trabajo 2007-259, Departamento de Economía - Pontificia Universidad Católica del Perú.
- J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
- J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
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