chapter 3 labor demand copyright © 2010 by the mcgraw-hill companies, inc. all rights reserved....
TRANSCRIPT
Chapter 3
Labor Demand
Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/Irwin
3-2
2010/10/03 工商時報台灣歐肯係數 四小龍最小 u = a
-0.1(Y/Y )• 主計處研究 : 現階段我國歐肯係數約在 0.10 ～ 0.16 之間，
即經濟成長每提升 1% ，只能降低失業率 0.10% ～ 0.16% 。
亞洲四小龍最小，顯示台灣 GDP 成長對改善失業的效果， 相對較低 :
• 金融海嘯前（ 97 年第 1 季）台灣的歐肯係數為 0.11 ，係數低於美、德、英等 14 個先進國家。
• 97 年第 1 季新加坡的歐肯係數為 0.17 、香港 0.23 、南韓0.35 。
• 台灣致力發展高科技產業，雖能創造 GDP ，但由於所能提供的就業機會非常有限。
3-3
3
Firm: Profit Optimization• Assume: Supply of each factor is fixed.• Assume markets are competitive:
each firm takes W, Re, and P as given.
P = price of output, W = nominal wage, Re= nominal rental rate
W /P = real wage (measured in units of output), Re /P= real rental rate
k
N
( , ) Re
K: P MP Re
N: P MP
Max PF K N K WN
FOC wrt
FOC wrt W
3-4
4
Demand for labor: A derived demand
N
N
N N
N
hire workers if P MP
Value of Marginal Product (VMP )
VMP P MP : Demand for labor
: MP
Pr ( Y): P ?
W
Win real terms w
Pofit Maximization FOC MC
3-5
Total Product, Marginal Product,
and Average Product Curves
0
20
40
60
80
100
120
140
0 2 4 6 8 10 12
Number of Workers
Ou
tpu
t
Total Product Curve
0
5
10
15
20
25
0 2 4 6 8 10 12
Number of Workers
Ou
tpu
t
Average Product
Marginal Product
3-6
Labor Demand Curve =VMPE
1 4 8
22
38
VMPE
VAPE
Number of Workers
3-7
SR Hiring Decision (summary)
• Value of Marginal Product:
VMPE= P*MPE
• A profit-maximizing firm hires workers up to the point where the wage rate equals the value of marginal product of labor.
• The demand curve for labor indicates how many workers the firm hires for each possible wage, holding capital constant.
• The labor demand curve is downward sloping. This reflects the fact that additional workers are costly due to the law of diminishing returns.
3-8
22
18
8 9 12
P ↑ SR Labor Demand ↑
VMPE
Number of Workers
VMPE
3-9
Critiques of Marginal Productivity Theory
• A common criticism is that the theory bears little relation to the way that employers make hiring decisions.
• Another criticism is that the assumptions of the theory are not very realistic.
• However, employers act as if they know the implications of marginal productivity theory (hence, they try to make profits and remain in business).
3-10
SR Demand Curve for the Industry
20
10
3015
Wage
Employment28
20
10
30 60
Wage
Employment
D
D
56
T
T
Firm Industry
3-11
LR Employment Decision
• In LR, firm maximizes profits by choosing how many workers to hire AND how much plant and equipment to invest in.
3-12
Isoquant Curves
Capital
Employment
q1
q0
X
K
E
Y
3-13
Isocost Lines
Capital
C1/r
Isocost with Cost Outlay C1C0/r
Isocost with Cost Outlay C0
EmploymentC0/w C1/w
3-14
Firm's Optimal Combination of Inputs: minimize costs
Capital
Employment
q0
B
P
A
175
100
C1/r
C0/r
3-15
Cost Minimization
• Profit maximization implies cost minimization.
• The firm chooses the least-cost combination of capital and labor.
• This least-cost choice is where the isocost line is tangent to the isoquant.
• Marginal rate of technical substitution equals the ratio of input prices, w / r, at the least-cost choice.
3-16
LR Demand for Labor: (-)vely sloped
• wage↓: two effects
1. Substitution Effect:
the firm utilizes cheaper labor to substitute more expensive factor K even if holding output constant.
→ N↑, K↓
2. Scale Effect:
the firm expanding production
→ N↑, K↑
Total effect: W↓ → N↑
3-17
SR vs LR Demand Curves for Labor
Dollars
Short-Run Demand Curve
Long-Run Demand Curve
Employment
3-18
2 Special Cases of Isoquants
Capital
Employment
q 0 Isoquant
100
200
5
20
Capital
Employment
q 0 Isoquant
Fig Left: Capital and labor are perfect substitutes if the isoquant is linear
Fig: Right: The two inputs are perfect complements if the isoquant is right-angled.
3-19
The Demand Curve for a Factor of Production is Affected by the Prices of Other Inputs
Price of input i
Employment of input i
D0
Price of input i
Employment of input i
D1D0
D1
The labor demand curve for input i shifts when the price of another input changes. (a) If the price of a substitutable input rises, the demand curve for input i shifts up. (b) If the price of a complement rises, the demand curve for input i shifts down.
(a)(b)
3-20
Elasticity of Substitution
• Elasticity of substitution ：替代彈性
• Cross-elasticity of factor demand ：交叉彈性
( )
( )
KN
Wr
( )
( )
KK
WW
3-21
Affirmative Action
q*
Q
P
Black Labor
White Labor
3-22
Marshall’s Rules
• Labor Demand is more elastic when:
– The elasticity of substitution is greater.
– The elasticity of demand for the firm’s output is greater.
– Labor’s share in total costs of production is greater.
– The elasticity of supply of other factors of production such as capital is greater.
3-23
Factor Demands given several inputs
• many different inputs:– Skilled and unskilled labor– Taiwan and foreign labor– Old and new machines
Capital-skill complementarity hypothesis:
If subsidies to investment: DK ↑
Demand for skilled vs. unskilled worker?
3-24
Labor Market Equilibrium
Dollars
Supply
whigh
w*
ESED E*
wlow
Demand
Employment
3-25
Minimum Wages in the United States,
1938-2007
0
1
2
3
4
5
6
7
1938 1944 1950 1956 1962 1968 1974 1980 1986 1992 1998 2004 2010
Year
0.2
0.3
0.4
0.5
0.6
Ratio
Nominal Wage
0
1
2
3
4
5
6
7
1938 1944 1950 1956 1962 1968 1974 1980 1986 1992 1998 2004 2010
Year
0.2
0.3
0.4
0.5
0.6
Ratio
Nominal Wage
Nominal Minimum Wage Ratio Min. Wage to Avg. Mfg. Wage
3-26
The Impact of the Minimum Wage on Employment
Dollars
S
D
Employment
w*
w
ESE*E
3-27
The Impact of Minimum Wages on the Covered and Uncovered Sectors
SU
Dollars Dollars
SC
EmploymentEU EU EUECEmployment
(b) Uncovered Sector
E
SU
SU
w
w*w*
DUDC
(If workers migrate to covered sector)
(If workers migrate to uncovered sector)
(a) Covered Sector
3-28
Asymmetric Variable Adjustment Costs
Change in
C 0
+50 -25 Employment
0
Variable Adjustment Costs
Changing employment quickly is costly, and these costs increase at an increasing rate. If government policies prevent firms from firing workers, the costs of trimming the workforce will rise even faster than the costs of expanding the firm.
3-29
Variable adjustment costs:
Slow Transition to a New Labor Equilibrium
Employment
B150
A100
C50
Time
3-30
Problems with Estimating Labor Demand
Dollars
S0
w0
E1E0
D0
Employment
w1
S1
D1
w2
E2
Z
Z
P
Q
R