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Employment Changes, the Structure of Adjustment Costs, and Plant Size

  • Oivind A. Nilsen

    (University of Bergen
    IZA-Bonn)

  • Kjell G. Salvanes

    (Norwegian School of Economics and Business Administration)

  • Fabio Schiantarelli

    ()

    (Boston College
    IZA-Bonn)

In this paper we analyze the pattern of employment adjustment using a rich panel of Norwegian plants. The data suggest that the frequency of episodes of zero net employment changes is inversely related to plant size. We develop and estimate a simple "q" model of labor demand, allowing for the presence of fixed, linear and convex components in adjustment costs. The econometric evidence supports the existence of purely fixed components, unrelated to plant size. As a result, the range of inaction is wider for smaller plants. The quadratic components of costs are also important. Finally, in most specifications both fixed and convex costs are higher for employment contractions.

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Paper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 586.

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Date of creation: 29 Oct 2003
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Handle: RePEc:boc:bocoec:586
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