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Factor Adjustments After Deregulation: Panel Evidence from Colombian Plants

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Author Info
Marcela Eslava
John Haltiwanger
Adriana Kugler
Maurice Kugler

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Abstract

We analyze employment and capital adjustments using plant data from the Colombian Annual Manufacturing Survey. We estimate adjustment functions for capital and labor as a non-linear function of the gaps between desired and actual factor levels, allowing for interdependence in adjustments of the two factors. In addition to non-linear employment and capital adjustments in response to market fundamentals, we find that capital shortages reduce hiring and labor surpluses reduce capital shedding. We also find that after factor market deregulation in Colombia in 1991, factor adjustment hazards increased on the job destruction and capital formation margins. Finally, we find that completely eliminating frictions in factor adjustment would yield a substantial increase in aggregate productivity through improved allocative efficiency. Yet, the actual impact of the Colombian deregulation on aggregate productivity through factor adjustment was modest.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11656.

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Date of creation: Oct 2005
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Handle: RePEc:nbr:nberwo:11656

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Find related papers by JEL classification:
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
O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Semiparametric and Nonparametric Methods
J63 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Turnover; Vacancies; Layoffs

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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. Maurice Kugler & Eric A. Verhoogen, 2007. "Product Quality at the Plant Level: Plant Size, Exports, Output Prices and Input Prices in Colombia," Discussion Papers 0708-12, Columbia University, Department of Economics. [Downloadable!]
    Other versions:
  2. Contreras, Juan, 2006. "An Empirical Model of Factor Adjustment Dynamics," MPRA Paper 9797, University Library of Munich, Germany. [Downloadable!]
  3. Eslava, Marcela & Haltiwanger, John C. & Kugler, Adriana & Kugler, Maurice, 2009. "Trade Reforms and Market Selection: Evidence from Manufacturing Plants in Colombia," IZA Discussion Papers 4256, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  4. Susanne Prantl & Alexandra Spitz-Oener, 2009. "How does entry regulation influence entry into selfemployment and occupational mobility?," Discussion Papers 267, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
    Other versions:
  5. Amil Petrin & Jagadeesh Sivadasan, 2006. "Job Security Does Affect Economic Efficiency: Theory, A New Statistic, and Evidence from Chile," NBER Working Papers 12757, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Kaplan, David S., 2008. "Job creation and labor reform in Latin America," Policy Research Working Paper Series 4708, The World Bank. [Downloadable!]
    Other versions:
  7. Carlos Casacuberta & Néstor Gandelman, 2006. "Protection, Openness and Factor Adjustment: Evidence from the manufacturing sector in Uruguay," Documentos de Trabajo (working papers) 1806, Department of Economics - dECON. [Downloadable!]
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