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The Effects of Wages on Aggregate Employment: A Brief Summary of Empirical Studies

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  • Elizabeth Webster

    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)

Abstract

This paper provides non-technical summaries of theories which posit a relationship between aggregate employment and real wages and presents results from Australian and selected overseas empirical studies. Neoclasssical supply side theories assume that real wages, for given endowments of physical capital, primarily influence the cost of employing labour, and have an inverse relationship to aggregate employment. Keynesian demand side theories maintain that real wages affect both demand for labour as well as the relative costs of employing different techniques of production. Most estimations of the wage elasticity of demand for labour assume that real output is fixed and are thus not proper elasticities of demand. Recent Australian estimates range from -0.15 to -1.0 but the equations are not long run estimates as they include either output or the capital stock as an explanatory variable.

Suggested Citation

  • Elizabeth Webster, 2000. "The Effects of Wages on Aggregate Employment: A Brief Summary of Empirical Studies," Melbourne Institute Working Paper Series wp2000n14, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  • Handle: RePEc:iae:iaewps:wp2000n14
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    File URL: http://melbourneinstitute.unimelb.edu.au/downloads/working_paper_series/wp2000n14.pdf
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    References listed on IDEAS

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    1. Guy Debelle, 1998. "Introduction to Unemployment and the Australian Labour Market," RBA Annual Conference Volume,in: Guy Debelle & Jeff Borland (ed.), Unemployment and the Australian Labour Market Reserve Bank of Australia.
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    Cited by:

    1. Stevans, Lonnie, 2007. "The Relationship Among African American Male Earnings, Employment, Incarceration and Immigration: A Time Series Approach," MPRA Paper 5594, University Library of Munich, Germany.
    2. Agnese, Pablo, 2009. "Japan and her dealings with offshoring: An empirical analysis with aggregate data," IESE Research Papers D/793, IESE Business School.
    3. Pablo, Agnese, 2009. "Employment effects of offshoring. An application to Japanese industries, 1980-2005," MPRA Paper 16506, University Library of Munich, Germany.
    4. Marika Karanassou & Hector Sala, 2010. "Labour Market Dynamics in Australia: What Drives Unemployment?," The Economic Record, The Economic Society of Australia, vol. 86(273), pages 185-209, June.
    5. Mark Wooden, 2006. "Implications of Work Choices Legislation," Agenda - A Journal of Policy Analysis and Reform, Australian National University, College of Business and Economics, School of Economics, vol. 13(2), pages 99-116.
    6. Lonnie Stevans, 2009. "The Relationship Among African American Male Earnings, Employment, Incarceration and Immigration in the United States: A Time Series Approach," The Review of Black Political Economy, Springer;National Economic Association, vol. 36(3), pages 151-160, December.
    7. Luis N. Lanteri, 2013. "Determinantes económicos del nivel de empleo. Alguna evidencia para Argentina," Ensayos Revista de Economia, Universidad Autonoma de Nuevo Leon, Facultad de Economia, vol. 0(1), pages 73-100, May.

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