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Job creation in tight and slack labor markets

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  • Buchheim, Lukas
  • Watzinger, Martin
  • Wilhelm, Matthias

Abstract

Does investment create more jobs in slack than in tight labor markets? We study this question using data from a photovoltaic investment scheme. Comparing counties with high and low unemployment over time and across space, we find that € 100,000 of investment created 1.2 job-years in slack markets and fewer than 0.5 job-years in tight markets. This corresponds to labor earnings multipliers of 1.1 and below 0.5, respectively. These differences are not driven by changes in investment composition, capital-labor substitution, or regional migration. Consistent with crowding-out as a mechanism, investment leads to higher wage growth in tight than in slack markets.

Suggested Citation

  • Buchheim, Lukas & Watzinger, Martin & Wilhelm, Matthias, 2020. "Job creation in tight and slack labor markets," Journal of Monetary Economics, Elsevier, vol. 114(C), pages 126-143.
    • Handle: RePEc:eee:moneco:v:114:y:2020:i:c:p:126-143
    DOI: 10.1016/j.jmoneco.2019.02.006
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    Cited by:

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    3. Ana Maria Montoya Gómez, 2020. "From Fossil Fuels to Renewables: Studies on the Effects of Resource Endowments and Climate Policy on Economic Outcomes," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 90.
    4. Kanazawa, Nobuyuki, 2021. "Public investment multipliers: Evidence from stock returns of the road pavement industry in Japan," Journal of Economic Dynamics and Control, Elsevier, vol. 133(C).

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    More about this item

    Keywords

    Local employment multiplier; State-dependent multiplier;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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