Labor Economics chap4文档格式.docx

Labor Economics chap4文档格式.docx

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Labordemandelasticityisameasureofthesensitivityoflabordemandtoachangeinfactorprices.Thisweek,we'

llexaminehowtheHicks-Marshalllawsofderiveddemandaffectthemagnitudeoftheelasticityoflabordemand.Therelationshipbetweenunionstrategyandlabordemandelasticitywillalsobeexaminedaspartofthisdiscussion.

Own-wageelasticityoflabordemand

Thefirsttypeoflabordemandelasticitythatwewillexamineistheown-wageelasticityoflabordemand,definedas:

Theown-wageelasticityoflabordemandisameasureofhowsensitiveisthedemandforaparticularcategoryoflabortoachangeinthewagerateinthatspecificlabormarket.Forexample,theown-wageelasticityoflabordemandforplumbersisameasureofthe%changeinemploymentforplumbersthatresultsfroma1%changeinthewagerateforplumbers.Theisubscriptsinthedefinitionjustrefertothespecificlabormarketsusedinthenumeratoranddenominatoroftheexpressionabove.Itisexpectedthattheelasticityoflabordemandwillvarysubstantiallyacrosslabormarkets.

Aninspectionofthedefinitionaboveshouldindicatethattheown-wageelasticityoflabordemandwillalwaysbenegativeasaresultofthenegativeslopeoflabordemandcurves.Wesaythatlabordemandis:

Whenlabordemandiselastic,a1%increaseinthewagewillcauseemploymenttofallbymorethan1%.Iflabordemandisinelastic,a1%wageincreasewillcauseemploymenttofallbylessthan1%.Employmentwillfallby1%whenthewagerisesby1%iflabordemandisunitelastic.

Elasticityandslope

Studentswhoarefirstexposedtotheconceptofelasticityoftenconfuseelasticityandslope.Slopeinvolvesarelationshipbetweenthechangeinthelevelofthewageandachangeinthelevelofemployment.Elasticityinvolvespercentagechangesinthesevariables.Aconstantchangeinthelevelofavariablewillnotresultinaconstantpercentagechangeinthatvariable.Note,forexamplethat:

∙anincreasefrom1to2isa100%increase,

∙anincreasefrom2to3isa50%increase.

∙anincreasefrom3to4isa33%increase.

∙anincreasefrom4to5isa25%increase

∙anincreasefrom10to11isa10%increase.

∙anincreasefrom100to101isa1%increase.

Eventhoughthechangeinthelevelisoneunitineachofthecaseslisted,thepercentagechangeissmallerwhenthestartingvalueislarger.

Asindicatedinthediagrambelow,atthetopleftportionofthelabordemandcurvethepercentagechangeinquantitydemandedisrelativelylargebecausethelevelofquantityislow.Sincethewagerateisrelativelyhighinthisregion,though,anygivenchangeinthewagewillbearelativelysmallpercentagechange.Atthebottomrightsectionofthislabordemandcurve,though,thisrelationshipisreversed.Thus,wecanobservethatwhenthewageishighandthequantityoflabordemandedislow,labordemandwillberelativelyelastic（sincethenumeratorislargerinmagnitudethanthedenominator）.Aslaboruseincreases,though,thepercentagechangeinquantitydemandedfallsasthelevelofquantityriseswhilethepercentagechangeinwageincreasesasthewagedeclines.

Thisargumentindicatesthatown-wageelasticitydeclinescontinuouslyaslaboruserisesalongalineardemandcurve.Thediagrambelowillustratesthisrelationship.

Becauseofthis,theonlytimeitmakessensetospeakof"

anelasticity"

foralineardemandcurveisifthedemandcurveisperfectlyelastic（own-wageelasticityisinfinite）orifthedemandcurveisperfectlyinelastic（own-wageelasticity=0）.

Ifweconsidertwodemandcurvesthatpassthroughacommonpoint,though,wecanusetheslopesofthecurvestocomparetheelasticityofdemandatthatparticularstartingpoint.Inthiscase,asteepercurvewillbemoreinelasticthanaflattercurve.Thisisillustratedinthediagrambelow.

SupposethatinitiallythelevelofwageandemploymentisgivenbypointA.Ifthewageraterises（asillustratedabove）,therewillbealargerreductioninemploymentalongtheflatterdemandcurveD'

thanalongthesteeperdemandcurveD.Whenweusedifferencesinslopestoillustratedifferencesinelasticityinfutureexamples,notethatitisalwaysassumedthatthetwocurvessharethesamestartingpoint,evenwhentheyaredrawninseparatediagrams.

Hicks-Marshalllawsofderiveddemand

Beforediscussingthedeterminantsofown-wageelasticityoflabordemand,itisimportanttorecallthatthenegativeslopeofthelabordemandcurveistheresultofthesubstitutionandscaleeffectsthatoccurinresponsetoachangeinthewagerate.Asthewagerises,thesubstitutioneffectresultsinareductionoflaboruseandanincreaseintheuseofotherinputs,holdingthelevelofoutputconstant.Thescaleeffectresultingfromthe