Department of Economics and Business Economics

An Industry-Equilibrium Analysis of the LeChatelier Principle

Research output: Working paperResearch

Standard

An Industry-Equilibrium Analysis of the LeChatelier Principle. / Bache, Peter Arendorf; Laugesen, Anders.

Aarhus : Institut for Økonomi, Aarhus Universitet, 2013.

Research output: Working paperResearch

Harvard

Bache, PA & Laugesen, A 2013 'An Industry-Equilibrium Analysis of the LeChatelier Principle' Institut for Økonomi, Aarhus Universitet, Aarhus.

APA

Bache, P. A., & Laugesen, A. (2013). An Industry-Equilibrium Analysis of the LeChatelier Principle. Aarhus: Institut for Økonomi, Aarhus Universitet. Economics Working Papers, No. 2013-16

CBE

Bache PA, Laugesen A. 2013. An Industry-Equilibrium Analysis of the LeChatelier Principle. Aarhus: Institut for Økonomi, Aarhus Universitet.

MLA

Bache, Peter Arendorf and Anders Laugesen An Industry-Equilibrium Analysis of the LeChatelier Principle. Aarhus: Institut for Økonomi, Aarhus Universitet. (Economics Working Papers; Journal number 2013-16). 2013., 19 p.

Vancouver

Bache PA, Laugesen A. An Industry-Equilibrium Analysis of the LeChatelier Principle. Aarhus: Institut for Økonomi, Aarhus Universitet. 2013 Sep 4.

Author

Bache, Peter Arendorf ; Laugesen, Anders. / An Industry-Equilibrium Analysis of the LeChatelier Principle. Aarhus : Institut for Økonomi, Aarhus Universitet, 2013. (Economics Working Papers; No. 2013-16).

Bibtex

@techreport{85c71c76fcde4235bbd87ce9b6eac4d4,
title = "An Industry-Equilibrium Analysis of the LeChatelier Principle",
abstract = "By considering firms operating in a perfectly- or monopolisticallycompetitive industry with free entry, we show that well-established results on the celebrated LeChatelier principle (LCP) do not extend into an endogenous competitive environment. For instance, labour demand may be more elastic in the short run (where capital is fixed) than in the long run even if capital and labour are either complements or substitutes in profits. This may also be true locally at a point of long-run equilibrium. A novel insight is that industry-equilibrium effects introduce an asymmetry such that the LCP may hold for wage increases but not for wage decreases. These results are important for the interpretation of estimated labour-demand elasticities. Finally, we show that the LCP may hold for the total industry labour demand in situations where it does not hold for the labour demand of individual firms.",
keywords = "Complements, Substitutes, Monopolistic Competition, Industry Equilibrium, Labour Demand, LeChatelier Principle",
author = "Bache, {Peter Arendorf} and Anders Laugesen",
year = "2013",
month = "9",
day = "4",
language = "English",
series = "Economics Working Papers",
publisher = "Institut for {\O}konomi, Aarhus Universitet",
number = "2013-16",
type = "WorkingPaper",
institution = "Institut for {\O}konomi, Aarhus Universitet",

}

RIS

TY - UNPB

T1 - An Industry-Equilibrium Analysis of the LeChatelier Principle

AU - Bache, Peter Arendorf

AU - Laugesen, Anders

PY - 2013/9/4

Y1 - 2013/9/4

N2 - By considering firms operating in a perfectly- or monopolisticallycompetitive industry with free entry, we show that well-established results on the celebrated LeChatelier principle (LCP) do not extend into an endogenous competitive environment. For instance, labour demand may be more elastic in the short run (where capital is fixed) than in the long run even if capital and labour are either complements or substitutes in profits. This may also be true locally at a point of long-run equilibrium. A novel insight is that industry-equilibrium effects introduce an asymmetry such that the LCP may hold for wage increases but not for wage decreases. These results are important for the interpretation of estimated labour-demand elasticities. Finally, we show that the LCP may hold for the total industry labour demand in situations where it does not hold for the labour demand of individual firms.

AB - By considering firms operating in a perfectly- or monopolisticallycompetitive industry with free entry, we show that well-established results on the celebrated LeChatelier principle (LCP) do not extend into an endogenous competitive environment. For instance, labour demand may be more elastic in the short run (where capital is fixed) than in the long run even if capital and labour are either complements or substitutes in profits. This may also be true locally at a point of long-run equilibrium. A novel insight is that industry-equilibrium effects introduce an asymmetry such that the LCP may hold for wage increases but not for wage decreases. These results are important for the interpretation of estimated labour-demand elasticities. Finally, we show that the LCP may hold for the total industry labour demand in situations where it does not hold for the labour demand of individual firms.

KW - Complements, Substitutes, Monopolistic Competition, Industry Equilibrium, Labour Demand, LeChatelier Principle

M3 - Working paper

T3 - Economics Working Papers

BT - An Industry-Equilibrium Analysis of the LeChatelier Principle

PB - Institut for Økonomi, Aarhus Universitet

CY - Aarhus

ER -