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We develop a tractable equilibrium model of the labour market, featuring heterogeneous labour supply elasticities across occupations that can be estimated in a baseline period using observed worker flows. We use this model to study the heterogeneous impact of subsequent demand shifts on wages and employment in Germany. We validate the estimated elasticities with external correlates, including occupational licensing and task distance. Cross-occupation effects, capturing the response to demand shifts in close substitute occupations, are particularly important for explaining the labour market’s response to shocks. Overall, heterogeneous supply elasticities play a key role in explaining occupational changes over recent decades.
Authors
![Ben Etheridge](/sites/default/files/styles/square_desktop/public/2022-07/Ben_Etheridge.jpg?itok=wmOAgBOH)
Research Associate University of Essex
Ben joined the IFS in 2006 as a PhD scholar and is now a Research Associate, alongside his position as Lecturer at the University of Essex.
![Aitor Irastorza-Fadrique](/sites/default/files/styles/square_desktop/public/2022-07/Aitor%20Irastorza.jpg?itok=mKMjRjyT)
Research Officer
Aitor's research agenda aims to study the changing structure of the labour market and its impact on local places and individuals.
![Michael J. Böhm](/sites/default/files/styles/square_desktop/public/2024-06/Michael%20J%20Bohm.jpg?itok=rh3zfvbi)
Professor of Economics TU Dortmund University
Working Paper details
- DOI
- 10.1920/wp.ifs.2024.2824
- Publisher
- Institute for Fiscal Studies
Suggested citation
M, Böhm and B, Etheridge and A, Irastorza-Fadrique. (2024). The impact of labour demand shocks when occupational labour supplies are heterogeneous. 24/28. London: Institute for Fiscal Studies. Available at: https://ifs.org.uk/publications/impact-labour-demand-shocks-when-occupational-labour-supplies-are-heterogeneous (accessed: 30 June 2024).
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