Partial Adjustment Without Apology
Abstract
Econometric partial adjustment models perform relatively well at the aggregate level; however, many kinds of microeconomic behavior involve discrete and occasional choices. Analyzing the classic employment adjustment problem, we show how a generalized partial adjustment model tractably accommodates both observations by aggregating the actions of heterogeneous producers facing fixed adjustment costs. Aggregate disturbances cause changes in establishment-level target employment and in the measure of establishments actively adjusting to their target, whereas aggregate responses exhibit partial adjustment. Our framework also can be applied in general equilibrium settings with persistent idiosyncratic shocks without forfeiting the convenient use of linear solution methods. Copyright 2006 by the Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.Download Info
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Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.
Volume (Year): 47 (2006)
Issue (Month): 3 (08)
Pages: 779-809
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Related research
Keywords:Other versions of this item:
- Robert G. King & Julia K. Thomas, 2004. "Partial adjustment without apology," Staff Report 327, Federal Reserve Bank of Minneapolis.
- Robert G. King & Julia K. Thomas, 2005. "Partial Adjustment without Apology," Boston University - Department of Economics - Macroeconomics Working Papers Series WP2005-001, Boston University - Department of Economics.
- Robert G. King & Julia K. Thomas, . "Partial Adjustment without Apology," GSIA Working Papers 1999-E12, Carnegie Mellon University, Tepper School of Business.
- Robert G. King & Julia K. Thomas, 2004. "Partial Adjustment Without Apology," Working Papers 2004/15, Turkish Economic Association.
- Robert G. King & Julia K. Thomas, 2003. "Partial Adjustment without Apology," NBER Working Papers 9946, National Bureau of Economic Research, Inc.
- E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
- E2 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment
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