This paper estimates labor demand function based on the Generalized Leontief cost function and evaluates the various policy options for raising employment in the short term.
The main results of this paper are as follows; first, wage elasticity of labor de-mand is inelastic. This implies that policies which decrease the cost of labor are not cost-effective for promoting employment in the mid and long term. However, in the short term, they may be useful to cope with the serious unemployment problem.
Second, comparing with the policies temporarily reducing the corporate in-come tax burden in the form of tax credit, the effects of the policies temporarily reducing employers’ social security contribution for firm on employment are more effective.
Third, coping with the lack of labor supply to the mid and small business, it is necessary to introduce the policies temporarily reducing employees’ social security contribution.
The main results of this paper are as follows; first, wage elasticity of labor de-mand is inelastic. This implies that policies which decrease the cost of labor are not cost-effective for promoting employment in the mid and long term. However, in the short term, they may be useful to cope with the serious unemployment problem.
Second, comparing with the policies temporarily reducing the corporate in-come tax burden in the form of tax credit, the effects of the policies temporarily reducing employers’ social security contribution for firm on employment are more effective.
Third, coping with the lack of labor supply to the mid and small business, it is necessary to introduce the policies temporarily reducing employees’ social security contribution.