Heterogeneous Labor Demand in the Western Washington Sawmill Industry
This paper estimates a model of dynamic factor demand for skilled (quasi-fixed) and unskilled (variable) labor with output as a choice variable of the firm using a normalized quadratic profit function. The historical period, 1980-1988 is analyzed using firm- and county-level pooled, cross-sectional, time series data. The analysis of demand elasticities and adjustment rates of quasi-fixed factors suggests that skilled and unskilled labor react differently to changes in relative prices. Skilled labor adjusts slowly to optimal levels (50% adjusted at the end of 2 yr). Decomposition of elasticities into output constrained and output unconstrained results confirms previous findings that, with output constrained, labor is a substitute for wood and energy. The unconstrained elasticities show that output effects dominate long-run adjustments. The analysis indicates the existence of neutral technological change in the industry. For. Sci. 41(1):181-193.
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