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Demand for labour inputs and adjustment costs: evidence from Spanish manufacturing firms


  • Alonso-Borrego, Cesar


This paper examines the structure of the adjustment costs for heterogeneous labour inputs, allowing for asyrnmetries and for interaction effects in adjustment costs. To do this, an intertemporal model underlying firm's employment decisions is postulated, and the resulting Euler equations for the demands of permanent nonproduction (white collar) and production (blue collar) employees are estimated using a sample of Spanish manufacturing firms. The main results confirm the heterogeneity of adjustment costs for permanent employees, and the existence of significant cross-adjustment effects. This latter result implies that marginal adjustment costs from firing permanent production employees can be reduced if temporary workers are hired at the same time. However, there is not significant evidence of asyrnmetric adjustment costs in permanent labour inputs.
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  • Alonso-Borrego, Cesar, 1998. "Demand for labour inputs and adjustment costs: evidence from Spanish manufacturing firms," Labour Economics, Elsevier, vol. 5(4), pages 475-497, December.
  • Handle: RePEc:eee:labeco:v:5:y:1998:i:4:p:475-497

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    References listed on IDEAS

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    8. Pindyck, Robert S & Rotemberg, Julio J, 1983. " Dynamic Factor Demands under Rational Expectations," Scandinavian Journal of Economics, Wiley Blackwell, vol. 85(2), pages 223-238.
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    Cited by:

    1. Guiso, Luigi & Pistaferri, Luigi & Schivardi, Fabiano, 2006. "Labour Adjustment: Disentangling Firing and Mobility Costs," CEPR Discussion Papers 5787, C.E.P.R. Discussion Papers.
    2. repec:ebl:ecbull:v:10:y:2004:i:4:p:1-6 is not listed on IDEAS
    3. 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.
    4. Sami SAAFI, 2009. "Innovations technologiques, mobilité et demande de main-d’oeuvre qualifiée. Une analyse des industries tunisiennes (Technological innovations, mobility and skilled-labour deamnd : an analysis of tunis," Working Papers 206, Laboratoire de Recherche sur l'Industrie et l'Innovation. ULCO / Research Unit on Industry and Innovation.
    5. Sánchez Mangas, Rocío, 2001. "Estimation of a dynamic discrete choice model of irreversible investment," DES - Working Papers. Statistics and Econometrics. WS ws015628, Universidad Carlos III de Madrid. Departamento de Estadística.
    6. Andrew Benito, 2002. "Financial pressure, monetary policy effects and inventory adjustment by UK and Spanish firms," Working Papers 0226, Banco de España;Working Papers Homepage.
    7. Luigi Guiso & Luigi Pistaferri & Fabiano Schivardi, 2006. "Disentangling employment and wage rigidity," 2006 Meeting Papers 536, Society for Economic Dynamics.
    8. Robertson, Raymond & Dutkowsky, Donald H., 2002. "Labor adjustment costs in a destination country: the case of Mexico," Journal of Development Economics, Elsevier, vol. 67(1), pages 29-54, February.
    9. Hagen, Tobias, 2001. "Does fixed-term contract employment raise firms' adjustment-speed? Evidence from an establishment panel for West-Germany," ZEW Discussion Papers 01-57, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    10. Andrew Benito & Ignacio Hernando, 2003. "Labour demand, flexible contracts and financial factors: new evidence from Spain," Working Papers 0312, Banco de España;Working Papers Homepage.
    11. Cristina Barceló, 2007. "A Q-model of labour demand," Investigaciones Economicas, Fundación SEPI, vol. 31(1), pages 43-78, January.
    12. Sandra Martina Leitner, 2008. "Interrelatedness, Dynamic Factor Adjustment Patterns and Firm Heterogeneity in Austrian Manufacturing," Economics working papers 2008-03, Department of Economics, Johannes Kepler University Linz, Austria.
    13. Polder, Michael & Verick, Sher, 2004. "Dynamics of Labour and Capital Adjustment – A Comparison of Germany and the Netherlands," IZA Discussion Papers 1212, Institute for the Study of Labor (IZA).
    14. Gardebroek, Cornelis, 2001. "The Impact Of Manure Production Rights On Capital Investment In The Dutch Pig Sector," 2001 Annual meeting, August 5-8, Chicago, IL 20490, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    15. Adang, Eddy M.M. & Wensing, Michel, 2008. "Economic barriers to implementation of innovations in health care: Is the long run-short run efficiency discrepancy a paradox?," Health Policy, Elsevier, vol. 88(2-3), pages 236-242, December.
    16. Arai, Mahmood & Heyman, Fredrik, 2000. "Permanent and Temporary Labour: Job and Worker Flows in Sweden, 1989-1998," Working Papers 71, National Institute of Economic Research.
    17. Mahmood Arai & Fredrik Heyman, 2004. "Temporary contracts and the dynamics of job turnover," Economics Bulletin, AccessEcon, vol. 10(4), pages 1-6.
    18. Víctor Manuel Montuenga Gómez & Andrés E. Romeu Santana & Melchor Fernández Fernández, 2000. "Diferencias salariales y comportamiento no competitivo en el mercado de trabajo en la industria española," Documentos de trabajo - Analise Economica 0009, IDEGA - Instituto Universitario de Estudios e Desenvolvemento de Galicia.
    19. Soraya Roman, 2011. "Labour costs, informal economy and labor law reforms in Bolivia," Development Research Working Paper Series 08/2011, Institute for Advanced Development Studies.
    20. Heyman, Fredrik, 2001. "Wage Dispersion and Allocation of Jobs," SSE/EFI Working Paper Series in Economics and Finance 479, Stockholm School of Economics.

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