Factor adjustment costs: A structural investigation

Haroon Mumtaz and Francesco Zanetti

Journal of Economic Dynamics and Control, 2015, vol. 51, issue C, 341-355

Abstract: This paper assesses various capital and labor adjustment costs functions estimating a general equilibrium framework with Bayesian methods using US aggregate data. The estimation finds that the adjustment costs are convex in both capital and labor and allowing for their joint interaction is important. The structural model enables us to identify the response of factor adjustment costs to exogenous disturbances, and to establish that shocks to technology and the job separation rate are key drivers of adjustment costs. The analysis shows that factor adjustment costs enable the model to explain fluctuations in the firm׳s market value in the data.

Keywords: Adjustment costs; DSGE models; Labor market frictions; Bayesian estimation (search for similar items in EconPapers)
JEL-codes: C32 E22 E23 E24 E32 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

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Working Paper: Factor adjustment costs: a structural investigation (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:51:y:2015:i:c:p:341-355

DOI: 10.1016/j.jedc.2014.10.003

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