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Input Demand and the Short- and Long-Run Employment Thresholds. An Empirical Analysis for the German Manufacturing Sector

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  • Gebhard Flaig
  • Horst Rottmann

Abstract

The concept of the "employment threshold" plays an important role in the public discussion of unemployment. The employment threshol d is defined as that growth rate of output which is necessary to keep employment constant despite the continuous rise in labour productivity. It is related to the Okun coefficient which describes the relationship between the changes of output and unemploy ment. Many contributions to this debate give the impression that the employment threshold is more or less a structural characteristic which remains constant over time. In this paper we derive short- and long-run employment thresholds from an input demand sy stem and show empirically that they depend on factor prices. A moderate wage policy leads to a reduction of the output growth which is necessary for an increase in employment.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 264.

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Date of creation: 2000
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Handle: RePEc:ces:ceswps:_264

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Keywords: Okun's Law; employment threshold; productivity;

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References

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  1. Falk, Martin & Koebel, Bertrand M., 1997. "The Demand of Heterogeneous Labour in Germany," ZEW Discussion Papers 97-28, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  2. Lau, Lawrence J., 1978. "Applications of Profit Functions," Histoy of Economic Thought Chapters, in: Fuss, Melvyn & McFadden, Daniel (ed.), Production Economics: A Dual Approach to Theory and Applications, volume 1, chapter 3 McMaster University Archive for the History of Economic Thought.
  3. McFadden, Daniel, 1978. "Cost, Revenue, and Profit Functions," Histoy of Economic Thought Chapters, in: Fuss, Melvyn & McFadden, Daniel (ed.), Production Economics: A Dual Approach to Theory and Applications, volume 1, chapter 1 McMaster University Archive for the History of Economic Thought.
  4. Blinder, Alan S, 1997. "Is There a Core of Practical Macroeconomics That We Should All Believe?," American Economic Review, American Economic Association, vol. 87(2), pages 240-43, May.
  5. Weiss, Andrew A., 1984. "Systematic sampling and temporal aggregation in time series models," Journal of Econometrics, Elsevier, vol. 26(3), pages 271-281, December.
  6. Berndt, Ernst R. & Hesse, Dieter M., 1986. "Measuring and assessing capacity utilization in the manufacturing sectors of nine oecd countries," European Economic Review, Elsevier, vol. 30(5), pages 961-989, October.
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Citations

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Cited by:
  1. Falk, Martin & Koebel, Bertrand M., 2000. "Outsourcing of services, imported materials and the demand for heterogeneous labour : an application of a generalised box-cox function," ZEW Discussion Papers 00-51, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  2. Gebhard Flaig & Wolfgang Nierhaus & Wolfgang Meister & Oscar-Erich Kuntze & Andrea Gebauer & Erich Langmantel & Martin Meurers & Monika Ruschinski & Timo Wollmershäuser, 2003. "ifo Konjunkturprognose 2004: Erholung hat begonnen," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 56(24), pages 16-42, December.
  3. Gebhard Flaig & Horst Rottmann, 2009. "Labour Market Institutions and the Employment Intensity of Output Growth," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 229(1), pages 22-35, February.
  4. Jung, Sven, 2013. "Employment Adjustment in German Firms," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79696, Verein für Socialpolitik / German Economic Association.
  5. Gebhard Flaig & Horst Rottmann, 2005. "Labour Market Institutions and Employment Thresholds. An International Comparison," Ifo Working Paper Series Ifo Working Papers No.15, Ifo Institute for Economic Research at the University of Munich.
  6. Jung, Sven, 2012. "Employment adjustment in German firms," Discussion Papers 80, Friedrich-Alexander-University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
  7. Klaus Abberger & Gebhard Flaig & Wolfgang Nierhaus, 2007. "ifo Konjunkturumfragen und Konjunkturanalyse : ausgewählte methodische Aufsätze aus dem ifo Schnelldienst," ifo Forschungsberichte, Ifo Institute for Economic Research at the University of Munich, number 33, 8.
  8. Guenter Lang, 2002. "Innovative Slowdown, Productivity Reversal? - Estimating the Impact of R&D on Technological Change," Discussion Paper Series 218, Universitaet Augsburg, Institute for Economics.
  9. Cristiano Perugini, 2008. "Employment Intensity of Growth in Italy A Note Using Regional Data," Quaderni del Dipartimento di Economia, Finanza e Statistica 55/2008, Università di Perugia, Dipartimento Economia, Finanza e Statistica.
  10. Gebhard Flaig & Horst Rottmann, 2004. "Erhöht der Kündigungsschutz die Beschäftigungsschwelle?," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 57(17), pages 13-17, 09.
  11. Gebhard Flaig & Horst Rottmann, 2007. "Labour Market Institutions and the Employment Intensity of Output Growth. An International Comparison," CESifo Working Paper Series 2175, CESifo Group Munich.
  12. Guenter Lang, 2008. "Measuring the Returns of Research and Development: An Empirical Study of the German Manufacturing Sector over 45 Years," Working Papers 10, The German University in Cairo, Faculty of Management Technology.
  13. Beate Schirwitz, 2005. "Wirtschaftswachstum und Beschäftigung : die Beschäftigungsschwelle (Wachstum und Beschäftigung)," ifo Dresden berichtet, Ifo Institute for Economic Research at the University of Munich, vol. 12(03), pages 34-37, 06.

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