Wage costs and labour demand with some reference to employment in the Netherlands

Summary

This article evaluates some of the well-known theories of labour demand, with special reference made to macro-economic unemployment problems in the Netherlands. Two fields of problems have been distinguished. The first concerns the formulation of the new goals of economic policy. The second group regards the question of selecting the best fitting, in a statistical sense. As a final resolve, this approach defines that, what ever the ‘best’ theory may be, there clearly exists a negative relation between wage costs and employment in the Netherlands. However, it is also determined that the negative effects of high wage costs are not so large as suggested in the Central Planning Bureau studies, based on a Solow-Robinson model of embodied technological progress.