The develop of the Taiwanese manufacturing sector has induced a series of fundamental changes in the labor market, such as employment conditions and wage structures. Demand-side policies, including the health insurance system and the pension or social security system, have a direct impact on the production costs of individual producers. To assess the effects of these policies on factory as well as industry's demand for labor, it is necessary to examine the hiring decisions of the heterogeneous producers more closely. The purpose of this study is to build a labor demand model to estimate the long-run labor demand using Taiwanese Manufactureing survey data of individual plants. The focus is on estimating the plant-level wage and output elasticities. In doing so, the sample selection bias, endogeneity, and measurement error problems within the estimation are discussed. Different estimation models and estimation methods are chosen to solve the problems. In particular, a differencing model is used to correct for plantspecific characteristics, an instrumental variable estimator is used to correct for the measurement error in the output variable, and the Heckman's two stage estimation method is used to correct for a self-selection bias that results from plant failures.