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Identifying Adjustment Costs of Net and Gross Employment Changes

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Joao Miguel Ejarque ()
Oivind Anti Nilsen ()

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Abstract

A relatively unexplored question in dynamic labour demand regards the source of adjustment costs, whether they depend on net or gross changes in employment. We estimate a structural model of dynamic labour demand where the firm faces adjustment costs related to gross and net changes in its workforce. We focus on matching quarterly moments of hiring and of net changes in employment from a panel of establishments. The main component of adjustment costs in our panel is quadratic adjustment costs to gross changes in employment. We also estimate that adjustment costs have a large economic cost, roughly cutting the value of our establishments in half.

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Paper provided by University of Essex, Department of Economics in its series Economics Discussion Papers with number 660.

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Date of creation: 16 Sep 2008
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Handle: RePEc:esx:essedp:660

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  4. Steven J. Davis & R. Jason Faberman & John Haltiwanger, 2006. "The Flow Approach to Labor Markets: New Data Sources and Micro-Macro Links," NBER Working Papers 12167, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Nicholas Bloom, 2007. "The Impact of Uncertainty Shocks," NBER Working Papers 13385, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. Gourio, Francois & Kashyap, Anil K, 2007. "Investment spikes: New facts and a general equilibrium exploration," Journal of Monetary Economics, Elsevier, vol. 54(Supplemen), pages 1-22, September. [Downloadable!] (restricted)
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  7. Aubhik Khan & Julia K. Thomas, 2008. "Idiosyncratic Shocks and the Role of Nonconvexities in Plant and Aggregate Investment Dynamics," Econometrica, Econometric Society, vol. 76(2), pages 395-436, 03. [Downloadable!] (restricted)
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  8. Lee, Bong-Soo & Ingram, Beth Fisher, 1991. "Simulation estimation of time-series models," Journal of Econometrics, Elsevier, vol. 47(2-3), pages 197-205, February. [Downloadable!] (restricted)
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  10. Kramarz, Francis & Michaud, Marie-Laure, 2004. "The Shape of Hiring and Separation Costs," IZA Discussion Papers 1170, Institute for the Study of Labor (IZA). [Downloadable!]
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  11. Nilsen, Oivind A. & Salvanes, Kjell G. & Schiantarelli, Fabio, 2007. "Employment changes, the structure of adjustment costs, and plant size," European Economic Review, Elsevier, vol. 51(3), pages 577-598, April. [Downloadable!] (restricted)
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  12. José Varejão & Pedro Portugal, 2007. "Employment Dynamics and the Structure of Labor Adjustment Costs," Journal of Labor Economics, University of Chicago Press, vol. 25, pages 137-165. [Downloadable!]
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  13. Hamermesh, Daniel S. & Hassink, Wolter H.J. & Ours, Jan C. van, 1994. "Job turnover and labor turnover : a taxonomy of employment dynamics," Serie Research Memoranda 0050, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics. [Downloadable!]
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  16. Abowd, John M. & Kramarz, Francis, 2003. "The costs of hiring and separations," Labour Economics, Elsevier, vol. 10(5), pages 499-530, October. [Downloadable!] (restricted)
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  17. Daniel S. Hamermesh, 1995. "Labor Demand and the Source of Adjustment Costs," NBER Working Papers 4394, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  18. Olivier Blanchard & Pedro Portugal, 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. [Downloadable!] (restricted)
  19. Hamermesh, Daniel S, 1992. "A General Model of Dynamic Labor Demand," The Review of Economics and Statistics, MIT Press, vol. 74(4), pages 733-37, November. [Downloadable!] (restricted)
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  20. Philip Vermeulen, 2006. "Employment stickiness in small manufacturing firms," Working Paper Series 640, European Central Bank. [Downloadable!]
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  21. Hamermesh, Daniel S & Pfann, Gerard A, 1996. "Turnover and the Dynamics of Labour Demand," Economica, London School of Economics and Political Science, vol. 63(251), pages 359-67, August. [Downloadable!] (restricted)
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  22. Robert G. King & Julia K. Thomas, 2006. "Partial Adjustment Without Apology," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(3), pages 779-809, 08. [Downloadable!] (restricted)
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  23. Walter Y. Oi, 1962. "Labor as a Quasi-Fixed Factor," Journal of Political Economy, University of Chicago Press, vol. 70, pages 538. [Downloadable!] (restricted)
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