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Employment changes, the structure of adjustment costs, and plant size

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  • Nilsen, Oivind A.
  • Salvanes, Kjell G.
  • Schiantarelli, Fabio

Abstract

In this paper we analyze the pattern of employment adjustment using a rich panel of Norwegian plants. The data suggest that the frequency of episodes of zero net employment changes is inversely related to plant size. We develop and estimate a simple “q” model of labor demand, allowing for the presence of fixed, linear and convex components of adjustment costs. The econometric evidence supports the existence of purely fixed components, unrelated to plant size. As a result, the range of inaction is wider for smaller plants. The quadratic components of costs are also important. Finally, in most specifications both fixed and convex costs are higher for employment contractions.

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Bibliographic Info

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 51 (2007)
Issue (Month): 3 (April)
Pages: 577-598

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Handle: RePEc:eee:eecrev:v:51:y:2007:i:3:p:577-598

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  4. Oivind Anti Nilsen & Fabio Schiantarelli, 1996. "Zeroes and Lumps in Investment: Empirical Evidence on Irreversibilities and Non-Convexities," Boston College Working Papers in Economics 337., Boston College Department of Economics, revised 01 Nov 2000.
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