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Employment Changes, the Structure of Adjustment Costs, and Plant Size

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Author Info

  • Nilsen, Øivind Anti

    ()
    (University of Bergen, Department of Economics)

  • Salvanes, Kjell G.

    ()
    (Norwegian School of Economics and Business Administration, and IZA-Bonn)

  • Schiantarelli, Fabio

    ()
    (Department of Economics, Boston College)

Abstract

In this paper we analyze the pattern of employment adjustment using a rich panel of Norwegian plants. The data suggest that the frequency of episodes of zero net employment changes is inversely related to plant size. We develop and estimate a simple “q” model of labor demand, allowing for the presence of fixed, linear and convex components of adjustment costs. The econometric evidence supports the existence of purely fixed components, unrelated to plant size. As a result, the range of inaction is wider for smaller plants. The quadratic components of costs are also important. Finally, in most specifications both fixed and convex costs are higher for employment contractions.

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Bibliographic Info

Paper provided by University of Bergen, Department of Economics in its series Working Papers in Economics with number 11/03.

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Length: 30 pages
Date of creation: 02 Nov 2003
Date of revision:
Handle: RePEc:hhs:bergec:2003_011

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Postal: Institutt for økonomi, Universitetet i Bergen, Postboks 7802, 5020 Bergen, Norway
Phone: (+47)55589200
Fax: (+47)55589210
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Web page: http://www.uib.no/econ/en
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Keywords: Adjustment costs; employment demand; size.;

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  11. Daniel S. Hamermesh & Gerard A. Pfann, 1996. "Adjustment Costs in Factor Demand," Journal of Economic Literature, American Economic Association, vol. 34(3), pages 1264-1292, September.
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  17. Jeffrey R. Campbell & Jonas D.M. Fisher, 1996. "Aggregate employment fluctuations with microeconomic asymmetries," Discussion Paper / Institute for Empirical Macroeconomics 112, Federal Reserve Bank of Minneapolis.
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  23. 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.
  24. Simon Gilchrist & Charles Himmelberg, 1998. "Investment, Fundamentals and Finance," NBER Working Papers 6652, National Bureau of Economic Research, Inc.
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