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A Q-model of labour demand

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  • Cristina Barceló

    (Banco de España)

Abstract

This paper studies the demand for labour using a Q model in which labour and capital entail adjustment costs. The estimates are based on an unbalanced panel of Spanish firms over the period 1989-96. The corresponding Q variable for labour is significant in explaining hiring rates. Its estimated coefficient varies across sectors in a way that suggests that the use of temporary labour is more widespread in economic sectors that incur smaller costs of adjusting labour due to the specific characteristics of their technology and economic activity. Interaction effects between investment and labour demands are also observed in their adjustment costs.

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Bibliographic Info

Article provided by Fundación SEPI in its journal Investigaciones Económicas.

Volume (Year): 31 (2007)
Issue (Month): 1 (January)
Pages: 43-78

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Handle: RePEc:iec:inveco:v:31:y:2007:i:1:p:43-78

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Keywords: Q model; adjustment costs; labour demand; panel data.;

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  1. Robert S. Pindyck & Julio J. Rotemberg, 1982. "Dynamic Factor Demands Under Rational Expectations," NBER Working Papers 1015, National Bureau of Economic Research, Inc.
  2. Ángel Estrada & Javier Vallés, 1998. "Investment and financial structure in Spanish manufacturing firms," Investigaciones Economicas, Fundación SEPI, vol. 22(3), pages 337-359, September.
  3. Shapiro, Matthew D, 1986. "The Dynamic Demand for Capital and Labor," The Quarterly Journal of Economics, MIT Press, vol. 101(3), pages 513-42, August.
  4. Hayashi, Fumio, 1982. "Tobin's Marginal q and Average q: A Neoclassical Interpretation," Econometrica, Econometric Society, vol. 50(1), pages 213-24, January.
  5. Bond, Stephen & Van Reenen, John, 2007. "Microeconometric Models of Investment and Employment," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 6, chapter 65 Elsevier.
  6. Stephen R. Bond & Jason G. Cummins, 2000. "The Stock Market and Investment in the New Economy: Some Tangible Facts and Intangible Fictions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 31(1), pages 61-124.
  7. Alonso-Borrego, Cesar, 1998. "Demand for labour inputs and adjustment costs: evidence from Spanish manufacturing firms," Labour Economics, Elsevier, vol. 5(4), pages 475-497, December.
  8. Bentolila, Samuel & Saint-Paul, Gilles, 1992. "The macroeconomic impact of flexible labor contracts, with an application to Spain," European Economic Review, Elsevier, vol. 36(5), pages 1013-1047, June.
  9. M. Concepcion Sanz, 1994. "Una estimación de la demanda de trabajo manual y no manual," Investigaciones Economicas, Fundación SEPI, vol. 18(2), pages 333-364, May.
  10. Alonso-Borrego, Cesar & Bentolila, Samuel, 1994. "Investment and Q in Spanish Manufacturing Firms," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 56(1), pages 49-65, February.
  11. Jason G. Cummins & Kevin A. Hassett & R. Glenn Hubbard, 1994. "A Reconsideration of Investment Behavior Using Tax Reforms as Natural Experiments," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(2), pages 1-74.
  12. Blundell, Richard & Bond, Stephen & Devereux, Michael & Schiantarelli, Fabio, 1992. "Investment and Tobin's Q: Evidence from company panel data," Journal of Econometrics, Elsevier, vol. 51(1-2), pages 233-257.
  13. Tobin, James, 1969. "A General Equilibrium Approach to Monetary Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(1), pages 15-29, February.
  14. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
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