Revisiting Marshall's Third Law: Why Does Labor's Share Interact with the Elasticity of Substitution to Decrease the Elasticity of Labor Demand?

Autor/in	Hoffman, Saul D.
Titel	Revisiting Marshall's Third Law: Why Does Labor's Share Interact with the Elasticity of Substitution to Decrease the Elasticity of Labor Demand?
Quelle	In: Journal of Economic Education, 40 (2009) 4, S.437-445 (9 Seiten)Infoseite zur Zeitschrift PDF als Volltext Verfügbarkeit
Sprache	englisch
Dokumenttyp	gedruckt; online; Zeitschriftenaufsatz
ISSN	0022-0485
Schlagwörter	Labor Economics; Supply and Demand; Costs + Suchen Sie Ihr Suchwort? Arbeitsökonomie; Bedarfsplanung; Cost; Kosten
Abstract	The third Marshall-Hicks-Allen rule of elasticity of derived demand purports to show that labor demand is less elastic when labor is a smaller share of total costs. As Hicks, Allen, and then Bronfenbrenner showed, this rule is not quite correct, and actually is complicated by an unexpected negative relationship involving labor's share of total costs and the elasticity of substitution. The standard intuitive explanation for the exception to the rule presented by Stigler and referenced in many textbooks describes a situation rather different than the one described in the rule. The author presents an example that illustrates the peculiar negative impact of labor's share operating via the elasticity of substitution and then explains why the unexpected relationship between labor's share of total cost, the elasticity of substitution, and the elasticity of labor demand holds. (Contains 1 figure, 1 table, and 5 notes.) (As Provided).
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Erfasst von	ERIC (Education Resources Information Center), Washington, DC
Update	2017/4/10