Labor Demand and the Structure of Adjustment Costs
AbstractThis study examines the costs firms face in adjusting labor demand to exogenous shocks. Evidence on monthly plant-level data shows that adjustment proceeds in jumps: employment is unchanged in response to small shocks, but moves instantaneously to a new equilibrium if the shocks are large. Results in the large literature that assumes smooth adjustment are due to aggregation of this nonlinear relation. The finding has implications for cyclical changes in productivity; for severance pay, layoff, and plant-closing restrictions; and for all other policies that affect the cost of adjusting employment. Copyright 1989 by American Economic Association.
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Bibliographic InfoArticle provided by American Economic Association in its journal American Economic Review.
Volume (Year): 79 (1989)
Issue (Month): 4 (September)
Other versions of this item:
- Daniel S. Hamermesh, 1988. "Labor Demand and the Structure of Adjustment Costs," NBER Working Papers 2572, National Bureau of Economic Research, Inc.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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- Trivedi, Pravin K, 1985. "Distributed Lags, Aggregation, and Compounding: Some Econometric Implications," Review of Economic Studies, Wiley Blackwell, vol. 52(1), pages 19-35, January.
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- Barro, Robert J, 1972. "A Theory of Monopolistic Price Adjustment," Review of Economic Studies, Wiley Blackwell, vol. 39(1), pages 17-26, January.
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