Scandinavian Working Papers in Economics
Working Paper Series,
Uppsala University, Department of Economics
No 2006:7: Testing Theories of Job Creation: Does Supply Create Its Own Demand?
Mikael Carlsson (), Stefan Eriksson () and Nils Gottfries ()
Additional contact information
Mikael Carlsson: Research Department, Postal: Research Department, Sveriges Riksbank, SE-103 37, Stockholm , Sweden
Stefan Eriksson: Department of Economics, Postal: Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden
Nils Gottfries: Department of Economics, Postal: Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden
Abstract: How well do alternative labor market theories explain variations in net job creation? According to search-matching theory, job creation in a firm should depend on the availability of workers (unemployment) and on the number of job openings in other firms (congestion). According to efficiency wage and bargaining theory, wages are set above the market clearing level and employment is determined by labor demand. To compare models, we estimate an encompassing equation for net job creation on firm-level data. The results support demand-oriented theories of job creation, whereas we find no evidence in favor of the search-matching theory.
Keywords: Job Creation; Involuntary Unemployment; Search-Matching; Labor Demand
23 pages, First version: February 17, 2006. Revised: October 23, 2008.
Full text files
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