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Testing Theories of Job Creation: Does Supply Create Its Own Demand?

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Author Info

  • Carlsson, Mikael

    ()
    (Research Department)

  • Eriksson, Stefan

    ()
    (Department of Economics)

  • Gottfries, Nils

    ()
    (Department of Economics)

Abstract

How well do alternative labor market theories explain variations in net job creation? According to search-matching theory, job creation in a firm should depend on the availability of workers (unemployment) and on the number of job openings in other firms (congestion). According to efficiency wage and bargaining theory, wages are set above the market clearing level and employment is determined by labor demand. To compare models, we estimate an encompassing equation for net job creation on firm-level data. The results support demand-oriented theories of job creation, whereas we find no evidence in favor of the search-matching theory.

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Bibliographic Info

Paper provided by Uppsala University, Department of Economics in its series Working Paper Series with number 2006:7.

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Length: 23 pages
Date of creation: 17 Feb 2006
Date of revision: 23 Oct 2008
Handle: RePEc:hhs:uunewp:2006_007

Contact details of provider:
Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
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Web page: http://www.nek.uu.se/
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Keywords: Job Creation; Involuntary Unemployment; Search-Matching; Labor Demand;

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References

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  1. Eriksson, Stefan & Gottfries, Nils, 2000. "Ranking of Job Applicants, On-the-job Search and Persistent Unemployment," Working Paper Series 2000:3, Uppsala University, Department of Economics.
  2. Gottfries, N., 1999. "Market Shares, Financial Constraints, and Pricing Behavior in the Export Market," Papers 1999:15, Uppsala - Working Paper Series.
  3. Gottfries, N. & Sjostrom, Y., 1998. "Insider Bargaining Power, Starting Wages, and Involuntary Unemployment," Papers 1998-10, Uppsala - Working Paper Series.
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Citations

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Cited by:
  1. Gustavsson, Magnus & Jordahl, Henrik, 2006. "Inequality and Trust: Some Inequalities are More Harmful than Others," Working Paper Series 2006:3, Uppsala University, Department of Economics.
  2. Christiano, Lawrence J. & Trabandt, Mathias & Walentin, Karl, 2011. "Introducing financial frictions and unemployment into a small open economy model," Journal of Economic Dynamics and Control, Elsevier, vol. 35(12), pages 1999-2041.
  3. Gustavsson, Magnus & Jordahl, Henrik, 2008. "Inequality and trust in Sweden: Some inequalities are more harmful than others," Journal of Public Economics, Elsevier, vol. 92(1-2), pages 348-365, February.
  4. Olivier Pierrard, 2007. "Commuters, residents and job competition in Luxembourg," BCL working papers 26, Central Bank of Luxembourg.
  5. Ekkehard Ernst & Uma Rani, 2011. "Understanding unemployment flows," Oxford Review of Economic Policy, Oxford University Press, vol. 27(2), pages 268-294.
  6. Pascal Michaillat, 2010. "Do Matching Frictions Explain Unemployment? Not in Bad Times," CEP Discussion Papers dp1024, Centre for Economic Performance, LSE.

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