A productivity growth interpretation of the labour demand shift-share model

This paper proposes modifications to the labour demand shift-share model set out in this journal by CASLER, 1989, to allow for its implementation and to extend its use to analyses of regional labour productivity growth. The paper begins by briefly outlining the theoretical basis for the shift-share method provided in Casler's paper, and then goes on to present a specific reformulation of the model which incorporates input price and technological growth effects on labour demand. These additional effects are defined as productivity components within the shift-share model, and the empirical and theoretical implications of the modifications made are discussed in the paper. An empirical example of the results obtained through the modified labour demand shift-share model is then provided for I;elected British regions. The paper concludes by outlining potential uses of the modified model for regional analyses of labour productivity.