Changing elasticities of labor demand in U.S. manufacturing

This paper provides a link between long-standing labor demand elasticity estimates in U. S. manufacturing and recent studies of wage patterns and labor demand shifts in response to technical change and international trade. We document asymmetric changes in labor demand elasticities including an absolute and relative increase in own-wage elasticity of demand for production workers. Separate estimates of substitution and scale responses imply that skill-biased technical change dominates increased product market competition as a source of the observed changes in labor demand elasticity. © 2010 International Atlantic Economic Society.