What about Labor Demand ? A Reinterpretation of the Elasticity of Hours to Wages

The estimation of the elasticity of hours to wages relies mostly on laborsupply models although workers choices of hours may be constrained. This article reexaminesthe theoretical meaning of this elasticity accounting for labor demand. To do so, we introducepart-time work characteristics within an on-the-job equilibrium search model framework.Workers receive two types of labor contracts : one corresponding to full-time jobs, and theother to part-time jobs. Utility as a function of wages and the number of weekly workedhours is the criterion workers consider when accepting or rejecting job oers. A rm postspart and full-time job oers as a result of the trade-o between its production level, its wagecosts and the costs of hiring part- and full-time employees. We propose a representation ofthe production function that generates a specic demand for part-time jobs. We prove theexistence of a Nash equilibrium, in which all rms hire both part- and full-time workers.Moreover, after calibrating the structural search model using French individuals and rmsdata, we show that the relationship between hours and wages depends dramatically on therm's demand function parameter in this model.