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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

    ()
    (ILO International Labour Organization)

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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Bibliographic 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
Date of revision:
Handle: RePEc:iza:izadps:dp1212

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

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Cited by:
  1. Contreras, Juan, 2006. "An Empirical Model of Factor Adjustment Dynamics," MPRA Paper 9797, University Library of Munich, Germany.
  2. Ryan Michaels, 2013. "The Joint Dynamics of Capital and Employment at the Plant Level," 2013 Meeting Papers, Society for Economic Dynamics 1189, Society for Economic Dynamics.
  3. Juan M. Contreras, 2006. "An Empirical Model of Factor Adjustment Dynamics: Working Paper 2006-13," Working Papers, Congressional Budget Office 18250, Congressional Budget Office.

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