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Job creation in tight and slack labor markets

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  • Buchheim, Lukas
  • Watzinger, Martin
  • Wilhelm, Matthias

Abstract

Does investment create more jobs in slack than in tight labor markets? We study this question using data from a photovoltaic investment scheme. Comparing counties with high and low unemployment over time and across space, we find that (sic)100,000 of investment created 1.2 job-years in slack markets and fewer than 0.5 job-years in tight markets. This corresponds to labor earnings multipliers of 1.1 and below 0.5, respectively. These differences are not driven by changes in investment composition, capital-labor substitution, or regional migration. Consistent with crowding-out as a mechanism, investment leads to higher wage growth in tight than in slack markets. (c) 2019 Elsevier B.V. All rights reserved.

Suggested Citation

  • Buchheim, Lukas & Watzinger, Martin & Wilhelm, Matthias, 2020. "Job creation in tight and slack labor markets," Munich Reprints in Economics 84751, University of Munich, Department of Economics.
    • Handle: RePEc:lmu:muenar:84751
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    Cited by:

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    2. Ellington, Michael & Martin, Chris & Wang, Bingsong, 2021. "Search Frictions and Evolving Labour Market Dynamics," Journal of Economic Dynamics and Control, Elsevier, vol. 127(C).
    3. Danzer, Alexander M. & Feuerbaum, Carsten & Gaessler, Fabian, 2020. "Labor Supply and Automation Innovation," IZA Discussion Papers 13429, Institute of Labor Economics (IZA).
    4. Kanazawa, Nobuyuki, 2021. "Public investment multipliers: Evidence from stock returns of the road pavement industry in Japan," Journal of Economic Dynamics and Control, Elsevier, vol. 133(C).

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    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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