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

  • Carlsson, Mikael

    ()

    (Research Department)

  • Eriksson, Stefan

    ()

    (Department of Economics)

  • Gottfries, Nils

    ()

    (Department of Economics)

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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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
Web page: http://www.nek.uu.se/Email:


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