Sectoral Labor Employment in a Caribbean Economy: The Case of Barbados

This study examines the demand for labor in five major sectors of the Caribbean economy of Barbados. While the demand for labor function in the nontradable sectors appears well-defined in terms of real wages and real aggregate output, the inclusion of a variable to capture the effects of capital-deepening appears important to the specification of labor demand in the tradable sectors—agriculture and manufacturing. Low estimates of real wage elasticities and real output elasticities in the vicinity of unity suggest that employers in the major sectors are more likely to alter their demand for labor based on expectations of the economy's performance than in response to labor cost factors denominated in producer prices.