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Employment Dynamics and the Structure of Labor Adjustment Costs

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  • José Varejão
  • Pedro Portugal

Abstract

In this article we document the patterns of employment adjustment at the micro level. We find clear evidence of lumpy adjustment consistent with the presence of nonconvexities in the adjustment technology—inaction is pervasive, action spells are short-lived, and extreme adjustment episodes are responsible for a nontrivial share of employment adjustment. We also find that the probability of employment adjustment increases with the duration of inaction. The skill structure of the workforce, the type of employment contract, and the proportion of low-tenure workers, which we interpret as proxies for the magnitude of adjustment costs, all influence the probability of adjustment.

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File URL: http://www.journals.uchicago.edu/cgi-bin/resolve?id=doi:10.1086/509825
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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Labor Economics.

Volume (Year): 25 (2007)
Issue (Month): ()
Pages: 137-165

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Handle: RePEc:ucp:jlabec:v:25:y:2007:p:137-165

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  1. John M. Abowd & Patrick Corbel & Francis Kramarz, 1996. "The Entry and Exit of Workers and the Growth of Employment: An Analysis of French Establishments," NBER Working Papers 5551, National Bureau of Economic Research, Inc.
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  4. Anderson, Patricia M, 1993. "Linear Adjustment Costs and Seasonal Labor Demand: Evidence from Retail Trade Firms," The Quarterly Journal of Economics, MIT Press, vol. 108(4), pages 1015-42, November.
  5. Pedro Portugal & Olivier Blanchard, 2001. "What Hides Behind an Unemployment Rate: Comparing Portuguese and U.S. Labor Markets," American Economic Review, American Economic Association, vol. 91(1), pages 187-207, March.
  6. Ricardo J. Caballero & Eduardo Engel & John Haltiwanger, 1996. "Aggregate Employment Dynamics: Building from Microeconomic Evidence," Documentos de Trabajo 6, Centro de Economía Aplicada, Universidad de Chile.
  7. Christopher L. Foote, 1998. "Trend Employment Growth and the Bunching of Job Creation and Destruction," Harvard Institute of Economic Research Working Papers 1818, Harvard - Institute of Economic Research.
  8. Richard Blundell & Rachel Griffith & John Van Reenen, 1994. "Dynamic count data models of technological innovation," IFS Working Papers W94/10, Institute for Fiscal Studies.
  9. Mark Doms & Timothy Dunne, 1994. "Capital Adjustment Patterns in Manufacturing Plants," Working Papers 94-11, Center for Economic Studies, U.S. Census Bureau.
  10. Daniel S. Hamermesh, 1992. "Spatial and Temporal Aggregation in the Dynamics of Labor Demand," NBER Working Papers 4055, National Bureau of Economic Research, Inc.
  11. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540932, December.
  12. Sheshinski, Eytan & Weiss, Yoram, 1977. "Inflation and Costs of Price Adjustment," Review of Economic Studies, Wiley Blackwell, vol. 44(2), pages 287-303, June.
  13. Øivind Anti Nilsen & Fabio Schiantarelli, 2003. "Zeros and Lumps in Investment: Empirical Evidence on Irreversibilities and Nonconvexities," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 1021-1037, November.
  14. R. Gaston Gelos & Alberto Isgut, 2001. "Fixed Capital Adjustment: Is Latin America Different?," The Review of Economics and Statistics, MIT Press, vol. 83(4), pages 717-726, November.
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