The elasticity of demand for labour in Australia

Abstract

The elasticity of demand for labour at the aggregate level is an important parameter for macroeconomic analysis. In particular, policy issues concerning the impact of wage falls on employment and unemployment hinge on the size of this parameter. It is argued in the present paper that previous work on the elasticity demand for labour in Australia has been unsatisfactory in a number of ways. A new set of estimates is provided that are derived using a better methodology than before.