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The own-wage elasticity of labor demand: A meta-regression analysis

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  • Lichter, Andreas
  • Peichl, Andreas
  • Siegloch, Sebastian

Abstract

Firms' labor demand responses to wage changes are of key interest in empirical research and policy analysis. However, despite extensive research, estimates of labor demand elasticities remain subject to considerable heterogeneity. In this paper, we conduct a comprehensive meta-regression analysis to re-assess the empirical literature on labor demand elasticities. Building on 942 elasticity estimates from 105 different studies, we identify sources of variation in the absolute value of this elasticity. Heterogeneity due to the theoretical and empirical speci cation of the labor demand model, di fferent datasets used or sectors and countries considered explains more than 80% of the variation in the estimates. We further find substantial evidence for the presence of publication selection bias, as estimates of the own-wage elasticity of labor demand are upwardly inflated.

Suggested Citation

  • Lichter, Andreas & Peichl, Andreas & Siegloch, Sebastian, 2014. "The own-wage elasticity of labor demand: A meta-regression analysis," ZEW Discussion Papers 14-016, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:14016
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    Keywords

    labor demand; wage elasticity; meta-analysis;
    All these keywords.

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods

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