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Job creation in tight and slack labor markets

Lukas Buchheim, Martin Watzinger and Matthias Wilhelm

Munich Reprints in Economics from University of Munich, Department of Economics

Abstract: Does investment create more jobs in slack than in tight labor markets? We study this question using data from a photovoltaic investment scheme. Comparing counties with high and low unemployment over time and across space, we find that (sic)100,000 of investment created 1.2 job-years in slack markets and fewer than 0.5 job-years in tight markets. This corresponds to labor earnings multipliers of 1.1 and below 0.5, respectively. These differences are not driven by changes in investment composition, capital-labor substitution, or regional migration. Consistent with crowding-out as a mechanism, investment leads to higher wage growth in tight than in slack markets. (c) 2019 Elsevier B.V. All rights reserved.

Date: 2020
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Citations: View citations in EconPapers (1)

Published in Journal of Monetary Economics 114(2020): pp. 126-143

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