IDEAS home Printed from https://ideas.repec.org/p/iab/iabdpa/202221.html
   My bibliography  Save this paper

Can the Labor Demand Curve Explain Job Polarization?

Author

Listed:
  • Peichl, Andreas

    (Univ. München ; IZA)

  • Popp, Martin

    (Institute for Employment Research (IAB), Nuremberg, Germany)

Abstract

"In recent decades, many industrialized economies have witnessed a pattern of job polarization. While shifts in labor demand, namely routinization or offshoring, constitute conventional explanations for job polarization, there is little research on whether shifts in labor supply along the labor demand curve may equally result in job polarization. In this study, we assess the impact of labor supply shifts on job polarization. To this end, we determine unconditional wage elasticities of labor demand from a unique estimation of a profit-maximization model on linked employer-employee data from Germany. Unlike standard practice, we explicitly allow for variations in output and find that negative scale effects matter. Both for a skill- and a novel task-based division of the workforce, our elasticity estimates show that supply shifts from immigration and a decline in collective bargaining successfully explain occupational employment patterns during the 1990s." (Author's abstract, IAB-Doku) ((en))

Suggested Citation

  • Peichl, Andreas & Popp, Martin, 2022. "Can the Labor Demand Curve Explain Job Polarization?," IAB-Discussion Paper 202221, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    • Handle: RePEc:iab:iabdpa:202221
    DOI: 10.48720/IAB.DP.2221
    as

    Download full text from publisher

    File URL: https://doi.org/10.48720/IAB.DP.2221
    Download Restriction: no
    File URL: https://libkey.io/10.48720/IAB.DP.2221?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. David Card & Jörg Heining & Patrick Kline, 2013. "Workplace Heterogeneity and the Rise of West German Wage Inequality," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 128(3), pages 967-1015.
    2. Eberle, Johanna & Jacobebbinghaus, Peter & Ludsteck, Johannes & Witter, Julia, 2011. "Generation of time-consistent industry codes in the face of classification changes : Simple heuristic based on the Establishment History Panel (BHP)," FDZ Methodenreport 201105_en, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    3. Lawrence F. Katz & Kevin M. Murphy, 1992. "Changes in Relative Wages, 1963–1987: Supply and Demand Factors," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(1), pages 35-78.
    4. Maarten Goos & Alan Manning & Anna Salomons, 2009. "Job Polarization in Europe," American Economic Review, American Economic Association, vol. 99(2), pages 58-63, May.
    5. Lichter, Andreas & Peichl, Andreas & Siegloch, Sebastian, 2015. "The own-wage elasticity of labor demand: A meta-regression analysis," European Economic Review, Elsevier, vol. 80(C), pages 94-119.
    6. Surjit S. Sidhu & Carlos A. Baanante, 1981. "Estimating Farm-Level Input Demand and Wheat Supply in the Indian Punjab Using a Translog Profit Function," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 63(2), pages 237-246.
    7. Caliendo, Marco & Fedorets, Alexandra & Preuss, Malte & Schröder, Carsten & Wittbrodt, Linda, 2018. "The short-run employment effects of the German minimum wage reform," Labour Economics, Elsevier, vol. 53(C), pages 46-62.
    8. Deborah Goldschmidt & Johannes F. Schmieder, 2017. "The Rise of Domestic Outsourcing and the Evolution of the German Wage Structure," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 132(3), pages 1165-1217.
    9. Andreas Lichter & Andreas Peichl & Sebastian Siegloch, 2017. "Exporting and labour demand: Micro-level evidence from Germany," Canadian Journal of Economics, Canadian Economics Association, vol. 50(4), pages 1161-1189, November.
    10. Christensen, Laurits R & Jorgenson, Dale W & Lau, Lawrence J, 1973. "Transcendental Logarithmic Production Frontiers," The Review of Economics and Statistics, MIT Press, vol. 55(1), pages 28-45, February.
    11. M. Bronfenbrenner, 1961. "Notes On The Elasticity Of Derived Demand," Oxford Economic Papers, Oxford University Press, vol. 13(3), pages 254-261.
    12. David H. Autor & Frank Levy & Richard J. Murnane, 2003. "The skill content of recent technological change: an empirical exploration," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
    13. repec:iab:iabfme:201705(en is not listed on IDEAS
    14. Moritz Drechsel‐Grau & Andreas Peichl & Kai D. Schmid & Johannes F. Schmieder & Hannes Walz & Stefanie Wolter, 2022. "Inequality and income dynamics in Germany," Quantitative Economics, Econometric Society, vol. 13(4), pages 1593-1635, November.
    15. Maarten Goos & Alan Manning, 2007. "Lousy and Lovely Jobs: The Rising Polarization of Work in Britain," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 118-133, February.
    16. Mohammad Ferdous Alam & Ishak Haji Omar & Dale Squires, 2002. "Sustainable fisheries development in the tropics: trawlers and licence limitation in Malaysia," Applied Economics, Taylor & Francis Journals, vol. 34(3), pages 325-337.
    17. Diewert, Walter E & Wales, Terence J, 1987. "Flexible Functional Forms and Global Curvature Conditions," Econometrica, Econometric Society, vol. 55(1), pages 43-68, January.
    18. Slaughter, Matthew J., 2001. "International trade and labor-demand elasticities," Journal of International Economics, Elsevier, vol. 54(1), pages 27-56, June.
    19. Nickell, S J & Andrews, M, 1983. "Unions, Real Wages and Employment in Britain 1951-79," Oxford Economic Papers, Oxford University Press, vol. 35(0), pages 183-206, Supplemen.
    20. Peichl, Andreas & Siegloch, Sebastian, 2012. "Accounting for labor demand effects in structural labor supply models," Labour Economics, Elsevier, vol. 19(1), pages 129-138.
    21. Jörg Heining & Wolfram Klosterhuber & Stefan Seth, 2014. "An Overview on the Linked Employer-Employee Data of the Institute for Employment Research (IAB)," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 134(1), pages 141-148.
    22. Sakai, Yasuhiro, 1974. "Substitution and expansion effects in production theory: The case of joint production," Journal of Economic Theory, Elsevier, vol. 9(3), pages 255-274, November.
    23. Cox, Michael & Peichl, Andreas & Pestel, Nico & Siegloch, Sebastian, 2014. "Labor demand effects of rising electricity prices: Evidence for Germany," Energy Policy, Elsevier, vol. 75(C), pages 266-277.
    24. Higgins, James, 1986. "Input Demand and Output Supply on Irish Farms--A Micro-economic Approach," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 13(4), pages 477-493.
    25. Müller, Steffen, 2017. "Capital stock approximation with the perpetual inventory method: An update," FDZ Methodenreport 201705_en, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    26. repec:iab:iabfme:201412(en is not listed on IDEAS
    27. Krause, Michael U. & Uhlig, Harald, 2012. "Transitions in the German labor market: Structure and crisis," Journal of Monetary Economics, Elsevier, vol. 59(1), pages 64-79.
    28. Christian Dustmann & Bernd Fitzenberger & Uta Sch?nberg & Alexandra Spitz-Oener, 2014. "From Sick Man of Europe to Economic Superstar: Germany's Resurgent Economy," Journal of Economic Perspectives, American Economic Association, vol. 28(1), pages 167-188, Winter.
    29. Hijzen, Alexander & Swaim, Paul, 2010. "Offshoring, labour market institutions and the elasticity of labour demand," European Economic Review, Elsevier, vol. 54(8), pages 1016-1034, November.
    30. Revenga, Ana, 1997. "Employment and Wage Effects of Trade Liberalization: The Case of Mexican Manufacturing," Journal of Labor Economics, University of Chicago Press, vol. 15(3), pages 20-43, July.
    31. Addison, John T. & Portugal, Pedro & Varejão, José, 2014. "Labor demand research: Toward a better match between better theory and better data," Labour Economics, Elsevier, vol. 30(C), pages 4-11.
    32. Ann E. Harrison & Margaret S. McMillan, 2006. "Outsourcing Jobs? Multinationals and US Employment," NBER Working Papers 12372, National Bureau of Economic Research, Inc.
    33. Keizo Nagatani, 1978. "Substitution and Scale Effects in Factor Demands," Canadian Journal of Economics, Canadian Economics Association, vol. 11(3), pages 521-527, August.
    34. Pemberton, James, 1989. "Marshall's Rules for Derived Demand: A Critique and a Generalisation," Scottish Journal of Political Economy, Scottish Economic Society, vol. 36(4), pages 396-405, November.
    35. Ramon E. Lopez, 1984. "Estimating Substitution and Expansion Effects Using a Profit Function Framework," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 66(3), pages 358-367.
    36. Maarten Goos & Alan Manning & Anna Salomons, 2014. "Explaining Job Polarization: Routine-Biased Technological Change and Offshoring," American Economic Review, American Economic Association, vol. 104(8), pages 2509-2526, August.
    37. Lichter, Andreas & Peichl, Andreas & Siegloch, Sebastian, 2017. "Exporting and labour demand," Munich Reprints in Economics 49906, University of Munich, Department of Economics.
    38. 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.
    39. Lee, David & Saez, Emmanuel, 2012. "Optimal minimum wage policy in competitive labor markets," Journal of Public Economics, Elsevier, vol. 96(9-10), pages 739-749.
    40. Wagner, Alfred, 1891. "Marshall's Principles of Economics," History of Economic Thought Articles, McMaster University Archive for the History of Economic Thought, vol. 5, pages 319-338.
    41. Christian Dustmann & Johannes Ludsteck & Uta Schönberg, 2009. "Revisiting the German Wage Structure," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(2), pages 843-881.
    42. Dirk Antonczyk & Thomas DeLeire & Bernd Fitzenberger, 2018. "Polarization and Rising Wage Inequality: Comparing the U.S. and Germany," Econometrics, MDPI, vol. 6(2), pages 1-33, April.
    43. Alexandra Spitz-Oener, 2006. "Technical Change, Job Tasks, and Rising Educational Demands: Looking outside the Wage Structure," Journal of Labor Economics, University of Chicago Press, vol. 24(2), pages 235-270, April.
    44. David H. Autor & Lawrence F. Katz & Melissa S. Kearney, 2008. "Trends in U.S. Wage Inequality: Revising the Revisionists," The Review of Economics and Statistics, MIT Press, vol. 90(2), pages 300-323, May.
    45. Albrecht Glitz, 2012. "The Labor Market Impact of Immigration: A Quasi-Experiment Exploiting Immigrant Location Rules in Germany," Journal of Labor Economics, University of Chicago Press, vol. 30(1), pages 175-213.
    46. repec:iab:iabfme:201105(en is not listed on IDEAS
    47. George J. Borjas, 2021. "The Labor Demand Curve Is Downward Sloping: Reexamining The Impact Of Immigration On The Labor Market," World Scientific Book Chapters, in: Foundational Essays in Immigration Economics, chapter 9, pages 235-274, World Scientific Publishing Co. Pte. Ltd..
    48. Teulings, Coen N, 1995. "The Wage Distribution in a Model of the Assignment of Skills to Jobs," Journal of Political Economy, University of Chicago Press, vol. 103(2), pages 280-315, April.
    49. Mundlak, Yair, 2001. "Production and supply," Handbook of Agricultural Economics, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 1, chapter 1, pages 3-85, Elsevier.
    50. Dengler, Katharina & Matthes, Britta & Paulus, Wiebke, 2014. "Occupational Tasks in the German Labour Market : an alternative measurement on the basis of an expert database," FDZ Methodenreport 201412_en, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    51. Bradley, Jake & Kügler, Alice, 2019. "Labor market reforms: An evaluation of the Hartz policies in Germany," European Economic Review, Elsevier, vol. 113(C), pages 108-135.
    52. Mary Amiti & Shang-Jin Wei, 2006. "Service Offshoring and Productivity: Evidence from the United States," NBER Working Papers 11926, National Bureau of Economic Research, Inc.
    53. repec:iab:iabfda:201605(en is not listed on IDEAS
    54. Harold Hotelling, 1932. "Edgeworth's Taxation Paradox and the Nature of Demand and Supply Functions," Journal of Political Economy, University of Chicago Press, vol. 40(5), pages 577-577.
    55. Peirson, John, 1988. "The Importance of Being Unimportant: Marshall's Third Rule of Derived Demand," Scottish Journal of Political Economy, Scottish Economic Society, vol. 35(2), pages 105-114, May.
    56. Peter Ellguth & Susanne Kohaut & Iris Möller, 2014. "The IAB Establishment Panel—methodological essentials and data quality [Das IAB-Betriebspanel: Methodische Grundlagen und Datenqualität]," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 47(1), pages 27-41, March.
    57. J. R. Hicks, 1961. "Marshall'S Third Rule: A Further Comment," Oxford Economic Papers, Oxford University Press, vol. 13(3), pages 262-265.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Martin Popp, 2023. "How elastic is labor demand? A meta-analysis for the German labor market," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 57(1), pages 1-21, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Martin Popp, 2023. "How elastic is labor demand? A meta-analysis for the German labor market," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 57(1), pages 1-21, December.
    2. Maarten Goos & Melanie Arntz & Ulrich Zierahn & Terry Gregory & Stephanie Carretero Gomez & Ignacio Gonzalez Vazquez & Koen Jonkers, 2019. "The Impact of Technological Innovation on the Future of Work," JRC Working Papers on Labour, Education and Technology 2019-03, Joint Research Centre.
    3. Koomen, Miriam & Backes-Gellner, Uschi, 2022. "Occupational tasks and wage inequality in West Germany: A decomposition analysis," Labour Economics, Elsevier, vol. 79(C).
    4. Koomen, Miriam & Backes-Gellner, Uschi, 2022. "Occupational Tasks and Wage Inequality in Germany: A Decomposition Analysis," IZA Discussion Papers 15702, Institute of Labor Economics (IZA).
    5. Baumgarten, Daniel & Irlacher, Michael & Koch, Michael, 2020. "Offshoring and non-monotonic employment effects across industries in general equilibrium," European Economic Review, Elsevier, vol. 130(C).
    6. Arntz, Melanie & Gregory, Terry & Zierahn, Ulrich, 2016. "ELS issues in robotics and steps to consider them. Part 1: Robotics and employment. Consequences of robotics and technological change for the structure and level of employment," ZEW Expertises, ZEW - Leibniz Centre for European Economic Research, number 146501, June.
    7. Colja Schneck, 2021. "Trends in Wage Inequality in the Netherlands," De Economist, Springer, vol. 169(3), pages 253-289, August.
    8. Golo Henseke, 2019. "Against the Grain? Assessing Graduate Labour Market Trends in Germany Through a Task-Based Indicator of Graduate Jobs," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 141(2), pages 809-840, January.
    9. Dirk Antonczyk & Thomas DeLeire & Bernd Fitzenberger, 2018. "Polarization and Rising Wage Inequality: Comparing the U.S. and Germany," Econometrics, MDPI, vol. 6(2), pages 1-33, April.
    10. Thomsen, Stephan L, 2018. "Die Rolle der Computerisierung und Digitalisierung für Beschäftigung und Einkommen," Hannover Economic Papers (HEP) dp-645, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    11. Einiö, Elias, 2016. "The loss of production work: evidence from quasiexperimental identification of labour demand functions," LSE Research Online Documents on Economics 69019, London School of Economics and Political Science, LSE Library.
    12. Glitz, Albrecht & Wissmann, Daniel, 2021. "Skill Premiums and the Supply of Young Workers in Germany," Labour Economics, Elsevier, vol. 72(C).
    13. Winkler, Erwin, 2020. "Diverging paths: Labor reallocation, sorting, and wage inequality," VfS Annual Conference 2020 (Virtual Conference): Gender Economics 224535, Verein für Socialpolitik / German Economic Association.
    14. Beckert, Bernd & Buschak, Daniela & Graf, Birgit & Hägele, Martin & Jäger, Angela & Moll, Cornelius & Schmoch, Ulrich & Wydra, Sven, 2016. "Automatisierung und Robotik-Systeme," Studien zum deutschen Innovationssystem 11-2016, Expertenkommission Forschung und Innovation (EFI) - Commission of Experts for Research and Innovation, Berlin.
    15. Mario Bossler & Martin Popp, 2022. "Labor Demand on a Tight Leash," Papers 2203.05593, arXiv.org, revised Feb 2024.
    16. Mario Reinhold, 2016. "On the Link between Job Polarisation and Wage Inequality - A regional approach for Germany," ERSA conference papers ersa16p361, European Regional Science Association.
    17. Ljubica Nedelkoska & Simon Wiederhold, 2010. "Technology, outsourcing, and the demand for heterogeneous labor: Exploring the industry dimension," Jena Economics Research Papers 2010-052, Friedrich-Schiller-University Jena.
    18. Elias Einiö, 2016. "The loss of production work: evidence from quasi-experimental identification of labour demand functions," CEP Discussion Papers dp1451, Centre for Economic Performance, LSE.
    19. Salverda, Wiemer & Checchi, Daniele, 2014. "Labour-Market Institutions and the Dispersion of Wage Earnings," IZA Discussion Papers 8220, Institute of Labor Economics (IZA).
    20. Janssen, Simon & Mohrenweiser, Jens, 2018. "The Shelf Life of Incumbent Workers during Accelerating Technological Change: Evidence from a Training Regulation Reform," IZA Discussion Papers 11312, Institute of Labor Economics (IZA).

    More about this item

    Keywords

    Bundesrepublik Deutschland ; IAB-Open-Access-Publikation ; Ausland ; Auswirkungen ; Berufsgruppe ; Einwanderung ; IAB-Linked-Employer-Employee-Datensatz ; Tarifbindung ; institutionelle Faktoren ; Lohnelastizität ; Lohnentwicklung ; Niedriglohnland ; outsourcing ; produzierendes Gewerbe ; qualifikationsspezifische Faktoren ; Arbeitskräfteangebot ; Arbeitskräftenachfrage ; Tarifverhandlungen ; technischer Wandel ; Arbeitsmarktsegmentation ; 1993-2016;
    All these keywords.

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iab:iabdpa:202221. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: IAB, Geschäftsbereich Wissenschaftliche Fachinformation und Bibliothek (email available below). General contact details of provider: https://edirc.repec.org/data/iabbbde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.