Abstract
Real Wages, Investment and Employment: New Evidence from West German Sectoral Data. — Non-separable capital adjustment costs imply that investment directly affects the demand for labour and therefore justify not only the lagged dependent variable but also the presence of investment expenditures or Tobin’s valuation ratio Q in labour demand estimation. On this basis, the authors estimate a very parsimonious specification of demand for blue-collar workers in a panel of 32 West German industries. They find much larger short-run real wage employment elasticities than previous research, and robustly significant positive effects of investment or Tobin’s Q on labour demand.
Zusammenfassung
Reallöhne, Investitionen und Beschäftigung. Neue empirische Ergebnisse auf der Basis von disaggregierten Daten für die Wirtschaftszweige des Verarbeitenden Gewerbes in der Bundesrepublik Deutschland. — Die Existenz einer nicht separierbaren Anpassungskostenfunktion impliziert, daß die Investitionstätigkeit die Arbeitsnachfrage direkt beeinflußt und daß es deshalb gerechtfertigt ist, die Investitionsausgaben oder Tobin's Q als zusätzliche erklärende Variable bei der Schätzung von Arbeitsnachfragefunktionen zu verwenden. Die Schätzungen auf der Basis eines Modells anhand von Daten für 32 westdeutsche Industriezweige ergaben kurzfristige Reallohnelastizitäten, die deutlich höher sind als die aus früheren Forschungen. Außerdem ergaben sich signifikant positive Effekte der Investitionstätigkeit bzw. Tobin's Q auf die Arbeitsnachfrage.
Similar content being viewed by others
References
Anderson, Theodore W., Cheng Hsiao, “Estimation of Dynamic Models Using Panel Data”.Journal of the American Statistical Association, Vol. 76, 1981, pp. 598–606.
—,— “Formulation and Estimation of Dynamic Models Using Panel Data”.Journal of Econometrics, Vol. 18, 1982, pp. 47–82.
Arellano, Manuel,An Alternative Transformation for Fixed Effects Models with Predetermined Variables. Oxford University, Institute of Economics and Statistics, Applied Economics Discussion Paper No. 57. Oxford 1988.
—,Stephen Bond, “Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations”.The Review of Economic Studies, Vol. 58, 1991, pp. 277–297.
-, Olympia Bover,Another Look at the Instrumental-Variable Estimation of Error-Components Models. London School of Economics, Centre for Economic Performance, Discussion Paper No. 7. London 1990.
Dinenis, Elias, Michael Funke, “Factor Prices, Empoyment and Investment in UK and West German Manufacturing”.The Manchester School of Economic and Social Studies, Vol. 62, 1994, forthcoming.
FitzRoy, Felix, Robert Hart, “Hours, Layoffs and Unemployment Insurance Funding: Theory and Practice in an International Perspective”.The Economic Journal, Vol. 95, 1985, pp. 700–713.
Flaig, Gebhard, Viktor Steiner, “Stability and Dynamic Properties of Labour Demand in West German Manufacturing”.Oxford Bulletin of Economics and Statistics, Vol. 51, 1989, pp. 395–412.
Franz, Wolfgang,Arbeitsmarktökonomik. Berlin 1991.
—,Heinz König, “The Nature and Causes of Unemployment in the Federal Republic of Germany since the 1970s: An Empirical Investigation”.Economica, Vol. 53, 1986, pp. S219-S244.
Frisse, Kenneth, Michael Funke, Fidelis Lankes, “Financial Structure and Labour Demand of West German Industrial and Commercial Companies: A Study with Longitudinal Data”.Jahrbücher für Nationalökonomie und Statistik, Vol. 209, 1992, pp. 106–118.
Funke, Michael, “A Rational Expectations Approach to Labour Demand in West German Manufacturing”.Allgemeines Statistisches Archiv, Vol. 77, 1993, pp. 137–148.
Greene, William H.,Econometric Analysis. New York 1993.
Greenwald, Bruce C., Joseph E. Stiglitz, “Examining Alternative Macroeconomic Theories”.Brookings Papers on Economic Activity, No. 1, 1988, pp. 207–260.
Hamermesh, Daniel S.,Labor Demand. Princeton 1993.
Hansen, Lars P., “Large Sample Properties of Generalized Method of Moments Estimators”.Econometrica, Vol. 50, 1982, pp. 1029–1054.
Hart, Robert A.,Working Time and Employment. Boston 1987.
Hayashi, Fumio, Christopher Sims, “Nearly Efficient Estimation of Time Series Models with Predetermined, but not Exogenous, Instruments”.Econometrica, Vol. 51, 1983, pp. 783–798.
Keane, Michael P., David E. Runkle, “On the Estimation of Panel-Data Models with Serial Correlation when Instruments are not Strictly Exogenous”.Journal of Business & Economic Statistics, Vol. 10, 1992, pp. 1–9.
König, Heinz, Winfried Pohlmeier, “Employment, Labour Utilization and Procyclical Labour Productivity”.Kyklos, Vol. 41, 1988, pp. 551–572.
Kraft, Kornelius, “Expectations and the Adjustment of Hours and Employment”.Applied Economics, Vol. 21, 1989, pp. 487–495.
Lucas, Robert E., “Adjustment Costs and the Theory of Supply”.The Journal of Policital Economy, Vol. 75, 1967, pp. 321–334.
Nickell, Stephen, “Biases in Dynamic Models with Fixed Effects”.Econometrica, Vol. 49, 1981, pp. 1417–1426.
-, “Dynamic Models of Labour Demand”. In: Orley Ashenfelter, Richard Layard (Eds.),Handbook of Labor Economics, Vol. 1. Amsterdam 1986, pp. 473–522.
—,Sushil Wadhwani, “Union Wages and Employment: Tests Based on U.K. Firm-Level Data”.European Economic Review, Vol. 32, 1988, pp. 727–733.
—,— “Employment Determination in British Industry: Investigations Using Micro-Data”.The Review of Economic Studies, Vol. 58, 1991, pp. 955–969.
Sargan, John D., “Some Tests of Dynamic Specification for a Single Equation”.Econometrica, Vol. 48, 1980, pp. 879–897.
Sargent, Thomas J.,Macroeconomic Theory. New York 1979.
Treadway, Arthur B., “Adjustment Costs and Variable Inputs in the Theory of the Competitive Firm”.Journal of Economic Theory, Vol. 2, 1970, pp. 329–347.
White, Halbert, “A Heteroscedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroscedasticity”.Economentrica, Vol. 48, 1980, pp. 817–838.
—, “Instrumental Variables Regression with Independent Observations”.Econometrica, Vol. 50, 1982, pp. 483–499.
Zimmermann, Klaus F., “The Employment Consequences of Technological Advance, Demand and Labor Costs in 16 German Industries”.Empirical Economics, Vol. 16, 1991, pp. 253–266.