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A dynamic heterogeneous labour demand model for German manufacturing

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Author Info
Falk, Martin
Koebel, Bertrand

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Abstract

This paper presents an application of the Generalised Error Correction Model (GECM) for heterogeneous factor demands based on the quadratic cost function. Using data for 26 West German manufacturing industries over the period 1976-1995, it turns out that less general specifications such as the partial adjustment and the static AR(1) model are rejected. Furthermore, both shortrun and long-run labour demands of different skill classes are inelastic. Unskilled labour is found to have a somewhat higher wage elasticity in absolute terms than medium-skilled labour. A small part of shift in demand away from unskilled labour can be explained by the substitutability relationship between intermediate materials and unskilled labour. Between 6 and 13 percent of the observed shift towards high-skilled labour can be explained by capital accumulation.

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Publisher Info
Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 00-16.

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Date of creation: 2000
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Handle: RePEc:zbw:zewdip:5292

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Related research
Keywords: heterogeneous labour demand; dynamics; price elasticities;

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Find related papers by JEL classification:
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
E23 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Production

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Tombazos, Christis G, 1999. "The Role of Imports in Expanding the Demand Gap between Skilled and Unskilled Labour in the US," Applied Economics, Taylor and Francis Journals, vol. 31(4), pages 509-16, April. [Downloadable!] (restricted)
  2. Felix Fitzroy & Michael Funke, 1994. "Capital-Skill Complementarity in West German Manufacturing," CRIEFF Discussion Papers 9408, Centre for Research into Industry, Enterprise, Finance and the Firm.
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  3. Allen, Chris & Urga, Giovanni, 1999. "Interrelated Factor Demands from Dynamic Cost Functions: An Application to the Non-energy Business Sector of the UK Economy," Economica, London School of Economics and Political Science, vol. 66(263), pages 403-13, August. [Downloadable!] (restricted)
  4. Flaig, Gebhard & Steiner, Viktor, 1989. "Stability and Dynamic Properties of Labour Demand in West German Manufacturing," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 51(4), pages 395-412, November.
  5. Felix Fitzroy, Michael Funke, 1998. "Skills, Wages and Employment in East and West Germany," Regional Studies, Taylor and Francis Journals, vol. 32(5), pages 459-467, July. [Downloadable!] (restricted)
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  6. Judson, Ruth A. & Owen, Ann L., 1999. "Estimating dynamic panel data models: a guide for macroeconomists," Economics Letters, Elsevier, vol. 65(1), pages 9-15, October. [Downloadable!] (restricted)
  7. Philippe Aghion & Eve Caroli & Cecilia Garcia-Penalosa, 1999. "Inequality and Economic Growth: The Perspective of the New Growth Theories," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1615-1660, December. [Downloadable!] (restricted)
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  8. Julian R. Betts, 1997. "The Skill Bias Of Technological Change In Canadian Manufacturing Industries," The Review of Economics and Statistics, MIT Press, vol. 79(1), pages 146-150, February. [Downloadable!] (restricted)
  9. Diewert, Walter E & Wales, Terence J, 1987. "Flexible Functional Forms and Global Curvature Conditions," Econometrica, Econometric Society, vol. 55(1), pages 43-68, January. [Downloadable!] (restricted)
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  10. Anderson, G J & Blundell, R W, 1982. "Estimation and Hypothesis Testing in Dynamic Singular Equation Systems," Econometrica, Econometric Society, vol. 50(6), pages 1559-71, November. [Downloadable!] (restricted)
  11. Bergstrom, Villy & Panas, Epaminondas E, 1992. "How Robust Is the Capital-Skill Complementarity Hypothesis?," The Review of Economics and Statistics, MIT Press, vol. 74(3), pages 540-46, August. [Downloadable!] (restricted)
  12. Nadiri, M Ishaq & Rosen, Sherwin, 1969. "Interrelated Factor Demand Functions," American Economic Review, American Economic Association, vol. 59(4), pages 457-71, Part I Se. [Downloadable!] (restricted)
  13. Koebel, Bertrand & Falk, Martin, 1999. "Curvature conditions and substitution pattern among capital, energy, materials and heterogeneous labour," ZEW Discussion Papers 99-06, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  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. [Downloadable!]
  2. Dennis J. Snower & Christian Merkl, 2006. "The Caring Hand that Cripples: The East German Labor Market After Reunification (Detailed Version)," IZA Discussion Papers 2066, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  3. Spitz, Alexandra, 2004. "Are Skill Requirements in the Workplace Rising? : Stylized Facts and Evidence on Skill-Biased Technological Change," ZEW Discussion Papers 04-33, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  4. Puhani, Patrick A., 2001. "Wage Rigidities in Western Germany? Microeconometric Evidence from the 1990s," IRISS Working Paper Series 2001-07, IRISS at CEPS/INSTEAD. [Downloadable!]
    Other versions:
  5. Boeters, Stefan & Feil, Michael, 2008. "Heterogeneous Labour Markets in a Microsimulation-AGE Model: Application to Welfare Reform in Germany," ZEW Discussion Papers 08-043, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
    Other versions:
  6. Carsten Ochsen & Heinz Welsch, 2005. "Technology, trade, and income distribution in West Germany: A factor-share analysis, 1976-1994," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 321-345, November. [Downloadable!]
  7. Ronny Freier & Viktor Steiner, 2007. "'Marginal Employment' and the Demand for Heterogenous Labour: Empirical Evidence from a Multi-factor Labour Demand Model for Germany," Discussion Papers of DIW Berlin 662, DIW Berlin, German Institute for Economic Research. [Downloadable!]
  8. Falk, Martin, 2001. "The impact of office machinery and computer capital on the demand for heterogeneous labor," ZEW Discussion Papers 01-66, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
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  9. Ronny Freier & Viktor Steiner, 2007. "‘Marginal Employment’ and the Demand for Heterogenous Labour: Empirical Evidence from a Multi-Factor Labour Demand Model for Germany," IZA Discussion Papers 2577, Institute for the Study of Labor (IZA). [Downloadable!]
  10. Carsten Ochsen, 2004. "Zukunft der Arbeit und Arbeit der Zukunft in Deutschland," Thuenen-Series of Applied Economic Theory 45, University of Rostock, Institute of Economics, Germany. [Downloadable!]
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  11. John Addison & Lutz Bellmann & Thorsten Schank & Paulino Teixeira, 2008. "The Demand for Labor: An Analysis Using Matched Employer–Employee Data from the German LIAB. Will the High Unskilled Worker Own-Wage Elasticity Please Stand Up?," Journal of Labor Research, Springer, vol. 29(2), pages 114-137, June. [Downloadable!] (restricted)
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  12. Lena Jacobi & Sandra Schaffner, 2008. "Does Marginal Employment Substitute Regular Employment? – A Heterogeneous Dynamic Labor Demand Approach for Germany," Ruhr Economic Papers 0056, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen. [Downloadable!]
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