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Dynamics of Labour and Capital Adjustment – A Comparison of Germany and the Netherlands


  • Polder, Michael

    () (Maastricht University)

  • Verick, Sher

    () (ILO International Labour Organization)


In this paper we investigate the dynamic adjustment of labour and capital in German and Dutch firms. The Dutch labour market is characterised by greater flexibility in wages and work arrangements in comparison to Germany. These institutional differences imply that employment dynamics in the two countries should differ, and in particular, labour adjustment in the Netherlands should be more responsive to economic changes. On the other hand, there is unlikely to be such a divergence in capital dynamics as investment conditions are similar. Our results are consistent with this hypothesis. Furthermore, there is no evidence that labour market regulations in the two countries affect the dynamics of capital adjustment.

Suggested Citation

  • 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).
  • Handle: RePEc:iza:izadps:dp1212

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    References listed on IDEAS

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    Cited by:

    1. Ryan Michaels, 2013. "The Joint Dynamics of Capital and Employment at the Plant Level," 2013 Meeting Papers 1189, Society for Economic Dynamics.
    2. Juan M. Contreras, 2006. "An Empirical Model of Factor Adjustment Dynamics: Working Paper 2006-13," Working Papers 18250, Congressional Budget Office.
    3. Contreras, Juan, 2006. "An Empirical Model of Factor Adjustment Dynamics," MPRA Paper 9797, University Library of Munich, Germany.

    More about this item


    investment; labour demand; interrelation; panel data; GMM;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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