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What about Labor Demand ? A Reinterpretation of the Elasticity of Hours to Wages

Listed author(s):
  • Muriel Roger


  • Sébastien Roux


The estimation of the elasticity of hours to wages relies mostly on laborsupply models although workers choices of hours may be constrained. This article reexaminesthe theoretical meaning of this elasticity accounting for labor demand. To do so, we introducepart-time work characteristics within an on-the-job equilibrium search model framework.Workers receive two types of labor contracts : one corresponding to full-time jobs, and theother to part-time jobs. Utility as a function of wages and the number of weekly workedhours is the criterion workers consider when accepting or rejecting job offers. A firm postspart and full-time job offers as a result of the trade-off between its production level, its wagecosts and the costs of hiring part- and full-time employees. We propose a representation ofthe production function that generates a specific demand for part-time jobs. We prove theexistence of a Nash equilibrium, in which all firms hire both part- and full-time workers.Moreover, after calibrating the structural search model using French individuals and firmsdata, we show that the relationship between hours and wages depends dramatically on thefirm's demand function parameter in this model.

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Paper provided by Center for Research in Economics and Statistics in its series Working Papers with number 2004-44.

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Date of creation: 2004
Handle: RePEc:crs:wpaper:2004-44
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