Working Paper: NBER ID: w1042
Authors: Richard B. Freeman
Abstract: This paper reviews a variety of estimates of the demand and supply elasticities of educated labor. It finds that elasticities of substitution between more and less educated labor range fran 1.0 to 2.0 and that elasticities of the supply of students to colleges are also on the order of 1.0 to 2.0 while elasticities of supply to specific professions are on the order of 2.0 to 3.0. With elasticities of this magnitude, wages and employment depend on both supply and demand factors, with shifts of either schedule influencing both market outcome variables.
Keywords: educated labor; elasticity of demand; elasticity of supply; economic incentives; higher education
JEL Codes: I20; J24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Economic incentives (M52) | Enrollment decisions (I23) |
| Salary differentials (J31) | Enrollment (I23) |
| Tuition and scholarship charges (I22) | Enrollment (I23) |
| Geographic variations in education levels (I24) | Local salaries (J31) |
| Demand for educated labor (J24) | Wages (J31) |
| Economic incentives (M52) | Elasticity of supply of students (D29) |
| Salary considerations (J33) | Supply elasticities to specific professions (J44) |
| Field switching (Y80) | Long-run elasticities (H30) |
| Elasticities of substitution (D11) | Wage distributions (J31) |
| Elasticities of substitution (D11) | Labor market outcomes (J48) |