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Are Adjustment Costs for Labor Asymetric? An Econometric Test On Panel Data for Italy

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Author Info

  • Jaramillo, F.
  • Schiantarelli, F.
  • Sembenelli, A.

Abstract

In this paper we analyze the structure of adjustment costs for labor. In particular, the question whether hiring and firing costs are asymmetric is addressed. We maintain the standard assumption of quadratic adjustment costs, but allow the multiplicative coefficient to differ for the firing and hiring regime. The Euler equations for this problem can be combined into a general model that nests the one with symmetric adjustment costs. The model can be conveniently estimated and the parameter restrictions implied by symmetry easily tested. We also extend the model to allow for variable adjustment coefficients. In the empirical application we use a panel data collected by Ceris on 52 large Italian firms for the period 1958-1988. The general conclusion from the econometric testing is that the hypothesis of symmetric adjustment costs is rejected by the data. Copyright 1993 by MIT Press.

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Bibliographic Info

Paper provided by C.V. Starr Center for Applied Economics, New York University in its series Working Papers with number 92-13.

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Length: 21 pages
Date of creation: 1992
Date of revision:
Handle: RePEc:cvs:starer:92-13

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Postal: C.V. Starr Center, Department of Economics, New York University, 19 W. 4th Street, 6th Floor, New York, NY 10012
Phone: (212) 998-8936
Fax: (212) 995-3932
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Web page: http://econ.as.nyu.edu/object/econ.cvstarr.html
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Postal: C.V. Starr Center, Department of Economics, New York University, 19 W. 4th Street, 6th Floor, New York, NY 10012
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Keywords: demand ; employment ; economic models ; trade;

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Cited by:
  1. Palm, Franz C. & Pfann, Gerard A., 1997. "Sources of asymmetry in production factor dynamics," Open Access publications from Maastricht University urn:nbn:nl:ui:27-5773, Maastricht University.
  2. Marcela Eslava & John Haltiwanger & Adriana Kugler & Maurice Kugler, 2005. "Factor Adjustments After Deregulation: Panel Evidence from Colombian Plants," NBER Working Papers 11656, National Bureau of Economic Research, Inc.
  3. Alfonso Arpaia & Esther Pérez & Karl Pichelmann, 2009. "Understanding Labour Income Share Dynamics in Europe," European Economy - Economic Papers 379, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  4. Dominique Goux & Eric Maurin & Marianne Pauchet, 1999. "Fixed-term Contracts and the Dynamics of Labour Demand," Working Papers 99-02, Centre de Recherche en Economie et Statistique.
  5. Kenji Azetsu & Mototsugu Fukushige, 2005. "Job Security Laws and Structural Change in the Japanese Labor Market," Discussion Papers in Economics and Business 05-31, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
  6. Feve, Patrick, 2002. "Solving labor demand models under asymmetric adjustment costs," Journal of Economic Dynamics and Control, Elsevier, vol. 26(5), pages 797-809, May.
  7. repec:oxf:wpaper:059 is not listed on IDEAS
  8. Kenji Azetsu & Mototsugu Fukushige, 2009. "The estimation of asymmetric adjustment costs for the number of workers and working hours - empirical evidence from Japanese industry data," Applied Economics Letters, Taylor and Francis Journals, vol. 16(10), pages 995-998.
  9. Zuzana Janko, 2008. "Nominal Wage Contracts, Labor Adjustment Costs and the Business Cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(2), pages 434-448, April.
  10. Bottasso, Anna & Sembenelli, Alessandro, 2001. "Market power, productivity and the EU Single Market Program: Evidence from a panel of Italian firms," European Economic Review, Elsevier, vol. 45(1), pages 167-186, January.
  11. Jung, Sven, 2012. "Employment adjustment in German firms," Discussion Papers 80, Friedrich-Alexander-University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
  12. Lucia Foster, 1999. "Employment Adjustment Costs and Establishment Characteristics," Working Papers 99-15, Center for Economic Studies, U.S. Census Bureau.
  13. Kölling, Arnd, 1998. "Dynamische Arbeitsnachfrage und asymmetrisches Anpassungsverhalten in der Bundesrepublik Deutschland : eine Untersuchung mit Daten aus dem IAB-Betriebspanel (Dynamic labour demand and asymmetrical adj," Mitteilungen aus der Arbeitsmarkt- und Berufsforschung, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 31(4), pages 637-647.

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