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New Measures of Labor Cost: Implications for Demand Elasticities and Nominal Wage Growth

  • Daniel S. Hamermesh

This study develops alternative quarterly measures of labor costs that refine the published data on hourly earnings and hourly compensation for the period 1953-1978. These new series account for deviations of hours paid for from hours worked, for the tax treatment of wages under the corporate income tax, and for variations in the user cost of training. They generally produce somewhat higher elasticities of labor demand, and explain variations in employment over time slightly better than do the published series. They also provide a different view of the recent path of wage inflation in the United States, suggesting that nominal wage growth has been more responsive to variations in the rate of price inflation than the published labor-cost series indicate. A data appendix lists the values of these new series; one series (that which adjusts for the hours paid/hours worked distinction) can be updated with readily avail- able data by persons interested in using these more appropriate measures of the cost of labor facing employers.

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File URL: http://www.nber.org/papers/w0821.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 0821.

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Date of creation: Dec 1981
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Publication status: published as Hamermesh, Daniel S. "New Measures of Labor Cost: Implications for Demand Elasticities and Nominal Wage Growth." The Measurement of Labor Cost, editedby Jack E. Triplett. Chicago: University of Chicago Press, (October 1983), pp. 287-305, 521-527.
Handle: RePEc:nbr:nberwo:0821
Note: LS
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  1. Chinloy, Peter T, 1980. "Sources of Quality Change in Labor Input," American Economic Review, American Economic Association, vol. 70(1), pages 108-19, March.
  2. Hamermesh, Daniel S, 1995. "Labour Demand and the," Economic Journal, Royal Economic Society, vol. 105(430), pages 620-34, May.
  3. Grubb, David B & Jackman, Richard A & Layard, Richard G, 1982. "Causes of the Current Stagflation," Review of Economic Studies, Wiley Blackwell, vol. 49(5), pages 707-30, Special I.
  4. Kim B. Clark & Richard B. Freeman, 1979. "How Elastic is The Demand for Labor?," NBER Working Papers 0309, National Bureau of Economic Research, Inc.
  5. Altonji, Joseph & Ashenfelter, Orley, 1980. "Wage Movements and the Labour Market Equilibrium Hypothesis," Economica, London School of Economics and Political Science, vol. 47(187), pages 217-45, August.
  6. Daniel S. Hamermesh, 1976. "Econometric Studies of Labor Demand and Their Application to Policy Analysis," Journal of Human Resources, University of Wisconsin Press, vol. 11(4), pages 507-525.
  7. Richard Quandt & Harvey Rosen, 1977. "Estimation of Disequilibrium Aggregate Labor Market," Working Papers 476, Princeton University, Department of Economics, Industrial Relations Section..
  8. Chirinko, Robert S, 1980. "The Real Wage Rate over the Business Cycle," The Review of Economics and Statistics, MIT Press, vol. 62(3), pages 459-61, August.
  9. Thomas J. Sargent, 1978. "Estimation of dynamic labor demand schedules under rational expectations," Staff Report 27, Federal Reserve Bank of Minneapolis.
  10. Solow, Robert M, 1980. "On Theories of Unemployment," American Economic Review, American Economic Association, vol. 70(1), pages 1-11, March.
  11. Frank Brechling, 1981. "Layoffs and Unemployment Insurance," NBER Chapters, in: Studies in Labor Markets, pages 187-208 National Bureau of Economic Research, Inc.
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