March 2023

IZA DP No. 16015: Labor Demand Responses to Changing Gas Prices

Mario Bossler, Alexander Moog, Thorsten Schank

published in: BE Journal of Economic Analysis & Policy, 2023, 23 (4), 1073–1080

In course of the current energy crisis, the consequences of increasing gas prices are heavily discussed. To date, however, there is no evidence of the impact of gas prices on the labor market. Using administrative employment data from 2012–2020, we find for manufacturing establishments a gas price elasticity of labor demand of −0.02, likely reflecting a scale effect. We also show that a rise in the gas price leads to an increase in establishment closure. A negative impact of the gas price on wages of 2 percent is consistent with rent-sharing.