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Dynamics of Labour and Capital Adjustment - A Comparison of Germany and the Netherlands

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Author Info
Polder, Michael (Maastricht University)
Verick, Sher () (IZA Bonn and University of Bonn)

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Abstract

In this paper we investigate the dynamic adjustment of labour and capital in German and Dutch firms. The Dutch labour market is characterised by greater flexibility in wages and work arrangements in comparison to Germany. These institutional differences imply that employment dynamics in the two countries should differ, and in particular, labour adjustment in the Netherlands should be more responsive to economic changes. On the other hand, there is unlikely to be such a divergence in capital dynamics as investment conditions are similar. Our results are consistent with this hypothesis. Furthermore, there is no evidence that labour market regulations in the two countries affect the dynamics of capital adjustment.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1212.

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Length: 36 pages
Date of creation: Jul 2004
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Handle: RePEc:iza:izadps:dp1212

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Related research
Keywords: investment; labour demand; interrelation; panel data; GMM;

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Find related papers by JEL classification:
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    Other versions:
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  9. Pfann, Gerard A & Palm, Franz C, 1993. "Asymmetric Adjustment Costs in Non-linear Labour Demand Models for the Netherlands and U.K. Manufacturing Sectors," Review of Economic Studies, Blackwell Publishing, vol. 60(2), pages 397-412, April. [Downloadable!] (restricted)
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  10. Letterie, Wilko A. & Pfann, Gerard A. & Polder, J. Michael, 2004. "Factor adjustment spikes and interrelation: an empirical investigation," Economics Letters, Elsevier, vol. 85(2), pages 145-150, November. [Downloadable!] (restricted)
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  13. Sakellaris, Plutarchos, 2004. "Patterns of plant adjustment," Journal of Monetary Economics, Elsevier, vol. 51(2), pages 425-450, March. [Downloadable!] (restricted)
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    Other versions:
  16. Frank Windmeijer, 2000. "A finite sample correction for the variance of linear two-step GMM estimators," IFS Working Papers W00/19, Institute for Fiscal Studies. [Downloadable!]
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  18. Hamermesh, Daniel S & Pfann, Gerard Antonie, 1996. "Adjustment Costs in Factor Demand," CEPR Discussion Papers 1371, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  19. Aguirregabiria, V., 1997. "Estimation of Dynamic Programming Models with Censored Dependent Variables," UWO Department of Economics Working Papers 9711, University of Western Ontario, Department of Economics.
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Contreras, Juan, 2006. "An Empirical Model of Factor Adjustment Dynamics," MPRA Paper 9797, University Library of Munich, Germany. [Downloadable!]
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