An Empirical Analysis of the Fixed Coefficient "Manpower Requirements" Model, 1960-1970

Abstract

The fixed coefficient "manpower requirements" model is one of the most widely used tools in the empirical analysis of labor skills.The model has the advantage of providing information on the effect of changes in the industrial composition of an economy on demand for labor in highly disaggregated occupations at the cost of neglecting factor substitution.This study examines the ability of the fixed coefficient model to explain changes in employment in 3-digit occupations in the United States from 1960 to 1970 and develops an "augmented requirements" model which uses changes in wages as well as fixed coefficient shifts in demand to analyze changes in employment.The paper finds that 1. by themselves, the requirements shifts account for much of the change in employment among detailed occupations in the period studied, though standard errors of estimate are sizeable; 2. even with crude adjustments for factor price effects, demand for detailed skills is far from zero elastic; 3. the fixed coefficient model seems to work not because demand and supply are economically unresponsive but because the variation in the wage structure and corresponding incentive to alter input coefficients is moderate relative to the variation in the shift in demand due to changes in industrial mix.

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