IDEAS home Printed from https://ideas.repec.org/p/zbw/imbwps/95.html
   My bibliography  Save this paper

It's not about adjustment costs: Estimating asymmetries in long-run labor demand using a fractional panel probit model

Author

Listed:
  • Kölling, Arnd

Abstract

Models of labor demand usually use cost or production functions to derive profit maximizing firm performance. These models often rely on the assumption of symmetric behavior, that is, the response to a positive or negative wage shock of the same relative size is identical to the shock, and the estimated labor demand elasticities are the same for increasing and decreasing employment. However, models like loss aversion and endowment effects question the assumption of symmetry in labor demand. In addition, the influence of a labor shortage should be reflected in the investigations. Estimations of Fractional Panel Probit models for three different skill levels are applied to evaluate these findings with a large panel of German establishments. The results indicate asymmetric structures for long-run own-wage elasticities and for some cross-wage elasticities, putting some doubt on the assumption of strict rationality in labor demand and indicating the influence of labor shortages.

Suggested Citation

  • Kölling, Arnd, 2018. "It's not about adjustment costs: Estimating asymmetries in long-run labor demand using a fractional panel probit model," Working Papers 95, Berlin School of Economics and Law, Institute of Management Berlin (IMB).
    • Handle: RePEc:zbw:imbwps:95
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/180993/1/102766752X.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Dohmen, Thomas, 2014. "Behavioral labor economics: Advances and future directions," Labour Economics, Elsevier, vol. 30(C), pages 71-85.
    2. repec:eee:labchp:v:1:y:1986:i:c:p:473-522 is not listed on IDEAS
    3. Cosmin Ilut & Matthias Kehrig & Martin Schneider, 2018. "Slow to Hire, Quick to Fire: Employment Dynamics with Asymmetric Responses to News," Journal of Political Economy, University of Chicago Press, vol. 126(5), pages 2011-2071.
    4. Kenji Azetsu & Mototsugu Fukushige, 2009. "The estimation of asymmetric adjustment costs for the number of workers and working hours - empirical evidence from Japanese industry data," Applied Economics Letters, Taylor & Francis Journals, vol. 16(10), pages 995-998.
    5. Daniel S. Hamermesh & Gerard A. Pfann, 1996. "Adjustment Costs in Factor Demand," Journal of Economic Literature, American Economic Association, vol. 34(3), pages 1264-1292, September.
    6. Card, David & Heining, Jörg & Kline, Patrick, 2015. "CHK effects," FDZ Methodenreport 201506_en, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    7. Emmanuel Dhyne & Catherine Fuss & Claude Mathieu, 2015. "Labour Demand Adjustment: Does Foreign Ownership Matter?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 77(6), pages 854-871, December.
    8. repec:iab:iabfme:201703(en is not listed on IDEAS
    9. Falk, Martin & Koebel, Bertrand M., 2004. "The impact of office machinery, and computer capital on the demand for heterogeneous labour," Labour Economics, Elsevier, vol. 11(1), pages 99-117, February.
    10. Fischer, Gabriele & Janik, Florian & Müller, Dana & Schmucker, Alexandra, 2008. "The IAB establishment panel : from sample to survey to projection," FDZ Methodenreport 200801_en, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    11. Robert J. Shiller, 2017. "Narrative Economics," American Economic Review, American Economic Association, vol. 107(4), pages 967-1004, April.
    12. Michael W. L. Elsby & Bart Hobijn & Aysegul Sahin, 2010. "The Labor Market in the Great Recession," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 41(1 (Spring), pages 1-69.
    13. Robert G. King & Julia K. Thomas, 2006. "Partial Adjustment Without Apology," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(3), pages 779-809, August.
    14. Addison, John T. & Portugal, Pedro & Varejão, José, 2014. "Labor demand research: Toward a better match between better theory and better data," Labour Economics, Elsevier, vol. 30(C), pages 4-11.
    15. Ronny Freier & Viktor Steiner, 2010. "'Marginal employment' and the demand for heterogeneous labour - elasticity estimates from a multi-factor labour demand model for Germany," Applied Economics Letters, Taylor & Francis Journals, vol. 17(12), pages 1177-1182.
    16. Bellmann Lutz & Hübler Olaf, 2014. "The Skill Shortage in German Establishments Before, During and After the Great Recession," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 234(6), pages 800-828, December.
    17. John Addison & Lutz Bellmann & Thorsten Schank & Paulino Teixeira, 2008. "The Demand for Labor: An Analysis Using Matched Employer–Employee Data from the German LIAB. Will the High Unskilled Worker Own-Wage Elasticity Please Stand Up?," Journal of Labor Research, Springer, vol. 29(2), pages 114-137, June.
    18. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, December.
    19. Walter Y. Oi, 1962. "Labor as a Quasi-Fixed Factor," Journal of Political Economy, University of Chicago Press, vol. 70, pages 538-538.
    20. Lichter, Andreas & Peichl, Andreas & Siegloch, Sebastian, 2015. "The own-wage elasticity of labor demand: A meta-regression analysis," European Economic Review, Elsevier, vol. 80(C), pages 94-119.
    21. Papke, Leslie E. & Wooldridge, Jeffrey M., 2008. "Panel data methods for fractional response variables with an application to test pass rates," Journal of Econometrics, Elsevier, vol. 145(1-2), pages 121-133, July.
    22. Hamermesh, Daniel S, 1989. "Labor Demand and the Structure of Adjustment Costs," American Economic Review, American Economic Association, vol. 79(4), pages 674-689, September.
    23. Erica L. Groshen, 1988. "Why do wages vary among employers?," Economic Review, Federal Reserve Bank of Cleveland, vol. 24(Q I), pages 19-38.
    24. Gabriele Fischer & Florian Janik & Dana Müller & Alexandra Schmucker, 2009. "European Data Watch: The IAB Establishment Panel - Things Users Should Know," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 129(1), pages 133-148.
    25. Berndt, Ernst R & Khaled, Mohammed S, 1979. "Parametric Productivity Measurement and Choice among Flexible Functional Forms," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1220-1245, December.
    26. Eberle, Johanna & Schmucker, Alexandra, 2017. "The establishment History Panel : Redesign and update 2016," FDZ Methodenreport 201703_en, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kölling, Arnd, 2016. "Family Firms and Labor Demand: Size Matters – But Only the Small Ones are Different," VfS Annual Conference 2016 (Augsburg): Demographic Change 145471, Verein für Socialpolitik / German Economic Association.
    2. repec:zbw:imbwps:90 is not listed on IDEAS
    3. Arnd Kölling, 2014. "Labor Demand and Unequal Payment: Does Wage Inequality matter? Analyzing the Influence of Intra-firm Wage Dispersion on Labor Demand with German Employer-Employee Data," Working Paper Series in Economics 326, University of Lüneburg, Institute of Economics.
    4. Kölling, Arnd & Mertens, Antje, 2020. "Exporting behavior and the demand for skills in German establishments," Working Papers 97, Berlin School of Economics and Law, Institute of Management Berlin (IMB).
    5. Hanan Nazier, 2019. "Estimating Labor Demand Elasticities and Elasticities of Substitution in Egyptian Manufacturing Sector: A Firm-Level Static Analysis," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 62(4), pages 549-575, December.
    6. Mario Bossler & Martin Popp, 2022. "Labor Demand on a Tight Leash," Papers 2203.05593, arXiv.org, revised Feb 2024.
    7. Arnd Kölling, 2022. "Monopsony power and the demand for low-skilled workers," The Economic and Labour Relations Review, , vol. 33(2), pages 377-395, June.
    8. Arnd Kölling & Antje Mertens, 2022. "Export activities and the demand for skills in German businesses," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 49(1), pages 189-223, February.
    9. Oivind A. Nilsen & Joao M. Ejarque, 2007. "Identifying Adjustment Costs of Net and Gross Employment Changes," 2007 Meeting Papers 670, Society for Economic Dynamics.
    10. Koelling Arnd, 2017. "Labor Demand and Unequal Payments: Does Wage Dispersion Matter? Using German Employer-Employee Data to Analyze the Influence of Intra-Firm Wage Inequality on Labor Demand," Review of Economics, De Gruyter, vol. 68(1), pages 1-39, April.
    11. Blatter, Marc & Muehlemann, Samuel & Schenker, Samuel, 2012. "The costs of hiring skilled workers," European Economic Review, Elsevier, vol. 56(1), pages 20-35.
    12. Jung, Sven, 2013. "Employment Adjustment in German Firms," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79696, Verein für Socialpolitik / German Economic Association.
    13. Jung, Sven, 2012. "Employment adjustment in German firms," Discussion Papers 80, Friedrich-Alexander University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
    14. Sven Jung, 2014. "Employment adjustment in German firms [Betriebliche Beschäftigungsanpassung in Deutschland]," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 47(1), pages 83-106, March.
    15. Fang Yao, 2008. "Lumpy Labor Adjustment as a Propagation Mechanism of Business Cycles," SFB 649 Discussion Papers SFB649DP2008-022, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    16. Boustanifar, Hamid, 2014. "Finance and employment: Evidence from U.S. banking reforms," Journal of Banking & Finance, Elsevier, vol. 46(C), pages 343-354.
    17. Wen Yi, 2004. "What Does It Take to Explain Procyclical Productivity?," The B.E. Journal of Macroeconomics, De Gruyter, vol. 4(1), pages 1-40, June.
    18. Peichl, Andreas & Siegloch, Sebastian, 2012. "Accounting for labor demand effects in structural labor supply models," Labour Economics, Elsevier, vol. 19(1), pages 129-138.
    19. Gülcan ÖNEL, 2018. "An implicit model of adjustment costs in differential input demand systems," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(2(615), S), pages 119-132, Summer.
    20. Domenico Ferraro, 2018. "The Asymmetric Cyclical Behavior of the U.S. Labor Market," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 30, pages 145-162, October.
    21. Peichl, Andreas & Popp, Martin, 2022. "Can the Labor Demand Curve Explain Job Polarization?," IAB-Discussion Paper 202221, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:imbwps:95. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/fhwbede.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.