Modelling Labour Demand: The Role of Economics

The principal aim of this article is to provide some insights into the role of economics in modelling labour demands. The impression that we have built up over time is that, while many of the existing economic theories have a considerable amount to offer in understanding the demand for labour, these theories are still in their infancy. They are generated almost entirely from within the subject rather than in co‐operation with other disciplines, and they are often tested at a macro level using econometric techniques rather than at the micro level using case study material. While much of the statistical testing at an aggregate level has been useful in confirming (and even on occasion refuting) the existing body of theory, many of the more interesting theoretical break‐throughs in economics generally have resulted from detailed knowledge of the researcher about the operation of particular firms.