Abstract
This paper analyzes wage elasticities using a panel dataset of 2800 large Belgian firms over the period 1987–1994. We explore various functional forms and find that the short-run wage elasticity varies between −0.37 and −0.65, while the long-run elasticity is robustly estimated to be larger than 1 in absolute value. These results are striking for they are much higher than those reported in previous studies using macroeconomic time-series data. This suggests that labour costs are more important in determining the demand for labour than initially was believed.
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Konings, J., Roodhooft, F. How Elastic is the Demand for Labour in Belgian Enterprises?Results from Firm Level Accounts Data, 1987–1994. De Economist 145, 229–241 (1997). https://doi.org/10.1023/A:1002994205321
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DOI: https://doi.org/10.1023/A:1002994205321