Employment and deadweight loss effects of observed non-wage labor costs
AbstractTo 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 dataset, 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 employersâ€™ contributions imposed by labor laws (health insurance, training, and taxes) as well as of observed workersâ€™ deductions (social security and income tax). We find that non-wage labor costs reduce employment by 17% for whitecollars and by 53% for blue-collars, with associated deadweight losses of 10% and 35% of total contributions, respectively. Since most firms undercomply with mandated employersâ€™ 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%.
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Bibliographic InfoPaper provided by Departamento de Economía - Pontificia Universidad Católica del Perú in its series Documentos de Trabajo with number 2007-259.
Length: 33 pages
Date of creation: 2007
Date of revision:
Publication status: published
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Postal: Av. Universitaria 1801, San Miguel, Lima, Perú
Phone: (511) 626-2000 ext. 4950, 4951
Fax: (511) 626-2874
Web page: http://www.pucp.edu.pe/departamento/economia/
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Other versions of this item:
- Giovanna Aguilar & Sílvio Rendon, 2010. "Employment And Deadweight Loss Effects Of Observed Nonwage Labor Costs," Economic Inquiry, Western Economic Association International, vol. 48(3), pages 793-809, 07.
- 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.
- 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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