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The Cost of Labor Adjustment: Inferences from the Gap

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Author Info
Russell Cooper (University of Texas)
Jonathan Willis (Federal Reserve Bank of Kansas City)
Abstract

This paper studies the aggregate implications of micro-level labor adjustment costs. Caballero and Engel (1993) find a dependence of aggregate employment growth on the cross sectional distribution of "employment gaps." This paper uses those results as moments in an indirect inference procedure to infer the underlying labor adjustment costs. We specify a dynamic optimization problem at the plant level, allowing for both convex and non-convex adjustment costs. Consistent with evidence at the micro level, our findings indicate that non-convex adjustment costs are necessary to match these aggregate moments. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/j.red.2008.12.001
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Publisher Info
Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 12 (2009)
Issue (Month): 4 (October)
Pages: 632-647
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Handle: RePEc:red:issued:06-149

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Related research
Keywords: Aggregate employment; Employment; Adjustment costs;

Other versions of this item:

Find related papers by JEL classification:
E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
J6 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies

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  1. Canadian Macro Study Group
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Russell Cooper & John Haltiwanger & Jonathan L. Willis, 2003. "Dynamics of labor demand : evidence from plant-level observations and aggregate implications," Research Working Paper RWP 03-12, Federal Reserve Bank of Kansas City. [Downloadable!]
    Other versions:
  2. Contreras, Juan, 2006. "An Empirical Model of Factor Adjustment Dynamics," MPRA Paper 9797, University Library of Munich, Germany. [Downloadable!]
  3. Russell Cooper & Jonathan L. Willis, 2001. "The economics of labor adjustment : mind the gap," Research Working Paper RWP 01-06, Federal Reserve Bank of Kansas City. [Downloadable!]
    Other versions:
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This page was last updated on 2009-12-16.

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