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Inventories, employment and hours

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  • Galeotti, Marzio
  • Maccini, Louis J.
  • Schiantarelli, Fabio

Abstract

The purpose of this paper is to develop a model that integrates inventory and labor decisions We extend a model of inventory behavior to include a detailed specification of the role of labor input in the production process and of the costs associated with it In particular we distinguish between employment hours and effort per worker and allow for adjustment costs associated with employment changes We assume that the requirement function for effective hours has a general trans-logarithmic form and derive an estimable system of Euler equations for inventories and employment with implied cross-equation restrictions The econometric results shed light on several important topics including the shape of the marginal cost of output and the role of labor hoarding as an explanation of procyclical productivity and the persistence of inventory stocks Moreover they raise questions about the adequacy of commonly used specifications such as Cobb-Douglas approximations to the production process and the definition of labor input as the product of employment and effective hours worked per worker

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 52 (2005)
Issue (Month): 3 (April)
Pages: 575-600

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Handle: RePEc:eee:moneco:v:52:y:2005:i:3:p:575-600

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Web page: http://www.elsevier.com/locate/inca/505566

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References

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Cited by:
  1. Piccirilli, Giulio, 2009. "Contingent worksharing," Research in Economics, Elsevier, vol. 63(2), pages 135-143, June.
  2. Adam Copeland & George Hall, 2011. "The response of prices, sales, and output to temporary changes in demand," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 26(2), pages 232-269, March.
  3. Leonardo Auernheimer & Danilo Trupkin, 2014. "The Role of Inventories and Capacity Utilization as Shock Absorbers," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(1), pages 70-85, January.
  4. Yi Wen, 2005. "Labor hoarding and inventories," Working Papers 2005-040, Federal Reserve Bank of St. Louis.

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