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An examination of firms' employment costs

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  • Sarah Dolfin
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    Abstract

    The existence of quasi-fixed costs of work may affect firms' desired employee hours and number of workers, which has important implications for the estimation of labour supply parameters. Firm-level data from the 1982 Employment Opportunity Pilot Project is used to estimate the importance to firms of employee quasi-fixed costs related to searching, hiring, training, and firing. Specifically, this paper examines how these costs affect number of workers and hours per worker, turnover, and vacancies, to the extent that the costs are determined by the firm's presumably exogenous industrial classification. An attempt is made to control for biases due to employee heterogeneity as well. Results show that higher costs are associated with lower turnover, fewer vacancies, and longer hours as predicted by a model of labour demand.

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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal Applied Economics.

    Volume (Year): 38 (2006)
    Issue (Month): 8 ()
    Pages: 861-878

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    Handle: RePEc:taf:applec:v:38:y:2006:i:8:p:861-878

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    1. Camerer, Colin, et al, 1997. "Labor Supply of New York City Cabdrivers: One Day at a Time," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 407-41, May.
    2. Joseph G. Altonji & Christina H. Paxson, 1992. "Labor Supply, Hours Constraints, and Job Mobility," Journal of Human Resources, University of Wisconsin Press, vol. 27(2), pages 256-278.
    3. Parsons, Donald O, 1972. "Specific Human Capital: An Application to Quit Rates and Layoff Rates," Journal of Political Economy, University of Chicago Press, vol. 80(6), pages 1120-43, Nov.-Dec..
    4. Joseph G. Altonji & Christina H. Paxson, 1986. "Job Characteristics and Hours of Work," NBER Working Papers 1895, National Bureau of Economic Research, Inc.
    5. Richard Blundell & Thomas MaCurdy, 1998. "Labour supply: a review of alternative approaches," IFS Working Papers W98/18, Institute for Fiscal Studies.
    6. Barron, John M & Black, Dan A & Loewenstein, Mark A, 1987. "Employer Size: The Implications for Search, Training, Capital Investment, Starting Wages, and Wage Growth," Journal of Labor Economics, University of Chicago Press, vol. 5(1), pages 76-89, January.
    7. Martinez-Granado, Maite, 2005. "Testing labour supply and hours constraints," Labour Economics, Elsevier, vol. 12(3), pages 321-343, June.
    8. Joseph G. Altonji & Christina H. Paxson, 1987. "Labor Supply Preferences, Hours Constraints, and Hours-Wage Tradeoffs," NBER Working Papers 2121, National Bureau of Economic Research, Inc.
    9. Gerald S. Oettinger, 1999. "An Empirical Analysis of the Daily Labor Supply of Stadium Vendors," Journal of Political Economy, University of Chicago Press, vol. 107(2), pages 360-392, April.
    10. Thomas Buchmueller, 1999. "Fringe benefits and the demand for part-time workers," Applied Economics, Taylor & Francis Journals, vol. 31(5), pages 551-563.
    11. Mark Montgomery & James Cosgrove, 1993. "The effect of employee benefits on the demand for part-time workers," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 47(1), pages 87-98, October.
    12. John M. Barron & Mark C. Berger & Dan A. Black, 1997. "On-the-Job Training," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number ojt, December.
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    Cited by:
    1. Silva, José Ignacio & Toledo, Manuel, 2009. "The Unemployment Volatility Puzzle: The Role of Matching Costs Revisited," MPRA Paper 15695, University Library of Munich, Germany.
    2. Erik de Regt, 2009. "Hourly wages and working time in the Dutch market sector 1962-1995," Applied Economics, Taylor & Francis Journals, vol. 41(6), pages 765-778.

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