The effects of wages on aggregate employment: a brief summary of empirical studies
Citations
Altmetric
Date
2000-09Affiliation
Economics and Commerce: Melbourne Institute of Applied Economic and Social ResearchMetadata
Show full item recordDocument Type
PreprintCitations
Webster, Elizabeth (2000) The effects of wages on aggregate employment: a brief summary of empirical studies.Access Status
Open AccessDescription
This paper was funded by the Business Council of Australia. Thanks are due to JoanneLoundes and John Creedy for comments. Views expressed represent those of the author and all errors remain the responsibility of the author.ISBN 0734014945, ISSN 13284991.
Abstract
This paper provides non-technical summaries of theories which posit a relationship between aggregate employment and real wages and presents results from Australian and selected overseas empirical studies. Neoclasssical supply side theories assume that real wages, for given endowments of physical capital, primarily influence the cost of employing labour, and have an inverse relationship to aggregate employment. Keynesian demand side theories maintain that real wages affect both demand for labour as well as the relative costs of employing different techniques of production. Most estimations of the wage elasticity of demand for labour assume that real output is fixed and are thus not proper elasticities of demand. Recent Australian estimates range from -0.15 to -1.0 but the equations are not long run estimates as they include either output or the capital stock as an explanatory variable.