Municipal Labor Demand in the Presence of Uncertainty: an Econometric Approach

29 Pages Posted: 17 Oct 2007 Last revised: 12 Aug 2010

See all articles by Douglas Holtz-Eakin

Douglas Holtz-Eakin

Syracuse University; National Bureau of Economic Research (NBER)

Harvey S. Rosen

Princeton University - Department of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute)

Date Written: November 1990

Abstract

We specify a modem of municipal labor demand when resource flows available to the municipality are not known with certainty. The model allows us to test the hypothesis that employment decisions are rational in the sense that they incorporate all available information at the time that the decisions are made. We find that for our sample of communities, on the whole one cannot reject the hypothesis that labor demand is consistent with intertemporal utility maximization under uncertainty. However, small and large communities exhibit different behavior. The employment decisions of small communities are consistent with the model, while those of large communities are not.

Suggested Citation

Holtz-Eakin, Douglas and Rosen, Harvey S., Municipal Labor Demand in the Presence of Uncertainty: an Econometric Approach (November 1990). NBER Working Paper No. w3516, Available at SSRN: https://ssrn.com/abstract=471514

Douglas Holtz-Eakin (Contact Author)

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Harvey S. Rosen

Princeton University - Department of Economics ( email )

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