Labour Demand Research: Towards a Better Match between Better Theory and Better Data

Addison, J.T.; Portugal, P.; Varejão, J.

Abstract

At first blush, most advances in labour demand were achieved by the late 1980s. Since then progress might appear to have stalled. We argue to the contrary that significant progress has been made in understanding labour market frictions and imperfections, and in modelling search behaviour and heterogeneous preferences. Perhaps most notable have been the improvements in data, in the form of longitudinal matched employer-employee data, and in techniques and algorithms (e.g. forsolving heterogeneous parameter models). In short, the Cinderella status of the field is frankly overdrawn. Nevertheless, a chief lacuna remains the need for a better match between theory and data. This paper provides a critical albeit eclectic assessment of these developments, along the dimensions of the static and dynamic theory of labour demand, wage formation, and estimation, noting advances and limitations. As is conventional, somewhat greater emphasis is placed on the latter.

Citation

Addison, J., Portugal, P., & Varejão, J. (2014). Labour Demand Research: Towards a Better Match between Better Theory and Better Data. Labour Economics, 30, 4-11. https://doi.org/10.1016/j.labeco.2014.06.002

• Journal Article Type: Article
• Publication Date: Oct 1, 2014
• Deposit Date: May 27, 2014
• Publicly Available Date: Jul 17, 2014
• Journal: Labour Economics
• Print ISSN: 0927-5371
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 30
• Pages: 4-11
• DOI: https://doi.org/10.1016/j.labeco.2014.06.002
• Keywords: Labour demand, Input heterogeneity, Labour adjustment costs, Wage and employment determination, Product and labour market imperfections, Multiple fixed effects, Exogenous wages, Establishment-level functions.
• Public URL: https://durham-repository.worktribe.com/output/1454208