Labor Adjustment Costs in a Panel of Establishments: A Structural Approach
AbstractThis paper estimates a structural model of the employment decision of the firm. Our establishment level data displays an extreme degree of rigidity in that employment levels are largely constant throughout our sample. This can be due to the fact that establishments face large shocks but also large adjustment costs, or alternatively that they incur no adjustment costs but that shocks are negligible. Given our identifying assumptions, we find that rigidity is due to adjustment costs and not to the shock process. We further find that these costs reduce the value of the firm as much as 5%. Finally, small fixed costs of adjustment have a large impact on entry and exit job flows.
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Bibliographic InfoPaper provided by Banco de Portugal, Economics and Research Department in its series Working Papers with number w200716.
Date of creation: 2007
Date of revision:
Other versions of this item:
- Ejarque, Joao & Portugal, Pedro, 2007. "Labor Adjustment Costs in a Panel of Establishments: A Structural Approach," IZA Discussion Papers 3091, Institute for the Study of Labor (IZA).
- C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
- C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
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- Yaman, F., 2011. "The costs of adjusting labor: Evidence from temporally disaggregated data," Working Papers 11/10, Department of Economics, City University London.
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