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Labour adjustment costs: Estimation of a dynamic discrete choice model using panel data for Greek manufacturing firms

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  • Lapatinas, Athanasios

Abstract

In this paper we estimate a dynamic structural model of employment at firm level. Our dataset consists of a balanced panel of 2790 Greek manufacturing firms. The empirical evidence of this dataset stresses three important stylized facts: (a) there are periods in which firms decide not to change their labour input, (b) there are periods of large employment changes (lumpy nature of labour adjustment) and (c) the commonality is employment spikes to be followed by smooth and low employment growth periods. Following Cooper and Haltiwanger [Cooper, R.W. and Haltiwanger, J. "On the Nature of Capital Adjustment Costs", Review of Economic Studies, 2006; 73(3); 611-633], we consider a dynamic discrete choice model of a general specification of adjustment costs including convex, non-convex and "disruption of production" components. We use a method of simulated moments procedure to estimate the structural parameters. Our results indicate considerable fixed costs in the Greek employment adjustment.

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Bibliographic Info

Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 16 (2009)
Issue (Month): 5 (October)
Pages: 521-533

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Handle: RePEc:eee:labeco:v:16:y:2009:i:5:p:521-533

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Web page: http://www.elsevier.com/locate/labeco

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Keywords: Labour adjustment costs Employment growth Dynamic discrete choice model Structural estimation Panel data Method of simulated moments;

References

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Cited by:
  1. Blatter, Marc & Muehlemann, Samuel & Schenker, Samuel, 2012. "The costs of hiring skilled workers," European Economic Review, Elsevier, vol. 56(1), pages 20-35.
  2. Jung, Sven, 2012. "Employment adjustment in German firms," Discussion Papers 80, Friedrich-Alexander-University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
  3. Jung, Sven, 2013. "Employment Adjustment in German Firms," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79696, Verein für Socialpolitik / German Economic Association.

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