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

Author

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  • Nilsen, Øivind Anti

    (Norwegian School of Economics)

  • Salvanes, Kjell G.

    (Norwegian School of Economics)

  • Schiantarelli, Fabio

    (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.

Suggested Citation

  • Nilsen, Øivind Anti & Salvanes, Kjell G. & Schiantarelli, Fabio, 2003. "Employment Changes, the Structure of Adjustment Costs, and Plant Size," IZA Discussion Papers 920, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp920
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    More about this item

    Keywords

    size; adjustment costs; employment demand;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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