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Labor Demand on a Tight Leash

Author

Listed:
  • Bossler, Mario

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

  • Popp, Martin

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

Abstract

"We develop a labor demand model that encompasses pre-match hiring cost arising from tight labor markets. Through the lens of the model, we study the effect of labor market tightness on firms’ labor demand by applying novel Bartik instruments to the universe of administrative employment data on Germany. In line with theory, the IV results suggest that a 10 percent increase in labor market tightness reduces firms’ employment by 0.5 percent. When accounting for search externalities, we find that the individual-firm wage elasticity of labor demand reduces from -0.7 to -0.5 at the aggregate level. For the 2015 minimum wage introduction, the elasticities imply only modest disemployment effects mirroring empirical ex-post evaluations. Moreover, the doubling of tightness between 2012 and 2019 led to a significant slowdown in employment growth by 1.1 million jobs." (Author's abstract, IAB-Doku) ((en))

Suggested Citation

  • Bossler, Mario & Popp, Martin, 2023. "Labor Demand on a Tight Leash," IAB-Discussion Paper 202302, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    • Handle: RePEc:iab:iabdpa:202302
    DOI: 10.48720/IAB.DP.2302
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    Cited by:

    1. Mario Bossler & Ying Liang & Thorsten Schank, 2024. "The Devil is in the Details: Heterogeneous Effects of the German Minimum Wage on Working Hours and Minijobs," Papers 2403.17206, arXiv.org, revised May 2024.
    2. Findeisen, Sebastian & Dauth, Wolfgang & Schlenker, Oliver, 2024. "Organized labor versus robots? Evidence from micro data," Working Papers 25, University of Konstanz, Cluster of Excellence "The Politics of Inequality. Perceptions, Participation and Policies".
    3. Anja Bauer, 2024. "Accounting for qualification in mismatch unemployment," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 58(1), pages 1-23, December.
    4. Sebastian Findeisen & Wolfgang Dauth & Oliver Schlenker, 2025. "Organized Labor Versus Robots? Co-Determination in Times of Automation," EconPol Forum, CESifo, vol. 26(04), pages 76-81, October.
    5. Götz, Valentina & Isphording, Ingo E. & Rinne, Ulf & Trenkle, Simon, 2024. "Fachkräftesicherung und Mitarbeiterbindung aus Sicht von Betrieben und Beschäftigten," IZA Research Reports 141, Institute of Labor Economics (IZA).
    6. Erik-Benjamin Borschlein & Mario Bossler & Martin Popp, 2024. "Scarce Workers, High Wages?," Papers 2408.04508, arXiv.org, revised Nov 2024.
    7. Schlenker, Oliver, 2024. "The deadly consequences of labor scarcity: Evidence from hospitals," Working Papers 42, University of Konstanz, Cluster of Excellence "The Politics of Inequality. Perceptions, Participation and Policies".
    8. Alexander Kubis, 2022. "Parität zwischen Vakanzen und Arbeitslosen am deutschen Arbeitsmarkt fast erreicht [Parity in the German Labour Market Nearly Achieved]," Wirtschaftsdienst, Springer;ZBW - Leibniz Information Centre for Economics, vol. 102(9), pages 680-682, September.
    9. Popp, Martin, 2024. "Minimum Wages in Concentrated Labor Markets," IZA Discussion Papers 17357, IZA Network @ LISER.
    10. Börschlein, Erik-Benjamin & Bossler, Mario & Popp, Martin, 2024. "Scarce Workers, High Wages?," IZA Discussion Papers 17447, IZA Network @ LISER.

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    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
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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