Search results for "labour demand"

Employment effects of reducing labour costs : considering potential bias in macro-estimates of the elasticity of labour demand

2017

In 2016 the Finnish government decided to implement the competitiveness pact in order to increase employment. The objective is to improve cost-competitiveness by lowering labor costs in the private sector. The elasticity of labour demand plays a key role in assessing the employment effects of the competitiveness pact. The idea of this study is based on the Economic Policy Council Report (2016) which argued that the government’s elasticity estimate is very high and predicts overly optimistic employment effects. The majority of studies estimate demand elasticities using aggregate data, which is likely to produce biased estimates. The problems relate in particular to the lack of exogenous vari…