Full Citation

Title: To What Extent Do High Wages Kill Jobs?

Citation Type: Miscellaneous

Publication Year: 2009

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Abstract: In search and bargaining models, the effect of higher wages on employment isdetermined by the elasticity of the job creation curve. In this paper, we use U.S.data over the 1970-2007 period to explore whether labor market outcomes abideby the restrictions implied by such models and to evaluate the elasticity of the jobcreation curve. The main difference between a job creation curve and a standarddemand curve is that the former represents a relationship between wages andemployment rates, while the latter represents a relationship between wages andemployment levels. Although this distinction is quite simple, it has substantiveimplications for the identification of the effect of higher wages on employment.The main finding of the paper is that U.S. labor market outcomes observed at thecity-industry level appear to conform well to the restrictions implied by search andbargaining theory and, using 10-year differences, we estimate the elasticity of thejob creation curve with respect to wages to be -0.3.

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Authors: Green, David; Beaudry, Paul; Sand, Ben

Publisher: University of Oxford

Data Collections: IPUMS USA

Topics: Labor Force and Occupational Structure, Other, Poverty and Welfare

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