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Identifying Adjustment Costs of Net and Gross Employment Changes

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  • Oivind A. Nilsen

    (Norwegian School of Economics and IZA)

  • Joao M. Ejarque

    (University of Essex)

Abstract

A relatively unexplored question in dynamic labour demand regards the source of adjustment costs, whether they depend on net or gross changes in employment. We simulate a structural model of dynamic labor demand where the firm faces adjustment costs related to gross and net changes in its workforce. These simulations allow us to select several moments of hiring and of net changes in employment that provide identification for our estimation with actual data. We then estimate adjustment costs in a panel of establishments on quarterly data. The main component of adjustment costs in our panel is quadratic adjustment costs to gross changes in employment. We find no significant evidence of fixed costs in our data.

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Paper provided by Society for Economic Dynamics in its series 2007 Meeting Papers with number 670.

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Date of creation: 2007
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Handle: RePEc:red:sed007:670

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  1. John M. Abowd & Patrick Corbel & Francis Kramarz, 1999. "The Entry And Exit Of Workers And The Growth Of Employment: An Analysis Of French Establishments," The Review of Economics and Statistics, MIT Press, vol. 81(2), pages 170-187, May.
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  5. Nilsen, Oivind A. & Salvanes, Kjell G. & Schiantarelli, Fabio, 2007. "Employment changes, the structure of adjustment costs, and plant size," European Economic Review, Elsevier, vol. 51(3), pages 577-598, April.
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  17. João Ejarque & Pedro Portugal, 2007. "Labor Adjustment Costs in a Panel of Establishments: A Structural Approach," Working Papers w200716, Banco de Portugal, Economics and Research Department.
  18. Kramarz, Francis & Michaud, Marie-Laure, 2003. "The Shape of Hiring and Separation Costs," CEPR Discussion Papers 3685, C.E.P.R. Discussion Papers.
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Cited by:
  1. Blatter, Marc & Muehlemann, Samuel & Schenker, Samuel, 2012. "The costs of hiring skilled workers," European Economic Review, Elsevier, vol. 56(1), pages 20-35.
  2. John T. Addison & Pedro Portugal & José Varejão, . "Labour Demand Research: Towards a Better Match between Better Theory and Better Data," Working Papers bank_wp, Banco de Portugal, Economics and Research Department.
  3. Blatter, Marc & Mühlemann, Samuel & Schenker, Samuel & Wolter, Stefan C., 2012. "Hiring Costs of Skilled Workers and the Supply of Firm-Provided Training," IZA Discussion Papers 6344, Institute for the Study of Labor (IZA).

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