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Labor Adjustment Dynamics: An Application Of System Gmm

Author

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  • Pedro M. Esperança

    (Nova School of Business of Economics, Universidade Nova de Lisboa, Portugal)

Abstract

This paper analyzes the dynamics of the Portuguese labor market using micro data: implications of adjustment costs to input factor adjustment throughout the business cycle are discussed; the current situation of the Portuguese labor market is reviewed; and measures of speed of adjustment for different types of labor (namely, the number of workers and the number of hours employed by firms) are obtained using a System GMM estimator and compared to those obtained for other countries. Additionally, we provide the median adjustment lag and short- and long-run labor demand elasticities with respect to firms' wages and sales. We conclude that the Portuguese labor market is slow in adjustment relative to other countries, while there is no evidence to support the claim that adjustment through the number of hours employed is faster than the adjustment through the number of workers employed.

Suggested Citation

  • Pedro M. Esperança, 2011. "Labor Adjustment Dynamics: An Application Of System Gmm," GEE Papers 0043, Gabinete de Estratégia e Estudos, Ministério da Economia, revised Dec 2011.
    • Handle: RePEc:mde:wpaper:0043
    as

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    File URL: https://www.gee.gov.pt/RePEc/WorkingPapers/GEE_PAPERS_43.pdf
    File Function: First version, 2011
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    References listed on IDEAS

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    Cited by:

    1. Pedro Portugal, 2015. "On fallacies surrounding the discussion about the reduction of social security contributions," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.

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    More about this item

    Keywords

    Labor demand; Adjustment dynamics; Adjustment costs; System GMM; Median adjustment lag;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

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