The own-wage elasticity of labor demand: A meta-regression analysis

The own-wage elasticity of labor demand is a key parameter in empirical research and policy analysis. However, despite extensive research, estimates of labor demand elasticities are subject to considerable heterogeneity. In this paper, we explore various dimensions of this heterogeneity by means of a comprehensive meta-regression analysis, building on information from 151 different studies containing 1334 estimates in total. Our results show that heterogeneity in the estimates of the elasticity is natural to a considerable extent: the magnitude of the elasticity depends on the theoretical model applied and features of the workforce. Moreover, we find that labor demand has become more elastic over time, and is particularly elastic in countries with low levels of employment protection legislation. Furthermore, we find heterogeneity due to the empirical specification of the labor demand model, characteristics of the dataset and publication bias.