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

  • Nilsen, Øivind Anti

    ()

    (Norwegian School of Economics)

  • Salvanes, Kjell G.

    ()

    (Norwegian School of Economics)

  • Schiantarelli, Fabio

    ()

    (Boston College)

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 of 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 Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 920.

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Length: 33 pages
Date of creation: Nov 2003
Date of revision:
Publication status: published in: European Economic Review, 2007, 51 (3), 577-598
Handle: RePEc:iza:izadps:dp920
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  2. Arthur Lewbel, 2000. "Endogenous Selection Or Treatment Model Estimation," Boston College Working Papers in Economics 462, Boston College Department of Economics, revised 13 Jun 2007.
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  24. Øivind Anti Nilsen & Fabio Schiantarelli, 2003. "Zeros and Lumps in Investment: Empirical Evidence on Irreversibilities and Nonconvexities," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 1021-1037, November.
  25. Dominique Goux & Eric Maurin & Marianne Pauchet, 1999. "Fixed-term Contracts and the Dynamics of Labour Demand," Working Papers 99-02, Centre de Recherche en Economie et Statistique.
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