Cost Behaviour – An Empirical Investigation For Euro Area Countries

Diana Filipa Cruz Costa (), Samuel Cruz Alves Pereira () and Elísio Fernando Moreira Brandão ()
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Diana Filipa Cruz Costa: Faculdade de Economia do Porto
Samuel Cruz Alves Pereira: Faculdade de Economia do Porto
Elísio Fernando Moreira Brandão: Faculdade de Economia do Porto

FEP Working Papers from Universidade do Porto, Faculdade de Economia do Porto

Abstract: Costs are an important component for businesses as they affect the results and hence the firm position. Therefore, to understand how they vary with changes in output and what factors influence them is fundamental, not only for managers, but for all agents related to organizations. The traditional theory predicts the existence of two types of costs, the variables and the fixed ones. However, an alternative hypothesis has emerged that accounts for an empirical phenomenon, the "cost stickiness", and later the "anti-stickiness", in which the behaviour of costs is based on discretionary management decisions, under different circumstances. In this paper, we show that the operating costs of Euro Area companies are sticky, since in the face of a positive change in sales costs increase more than decrease when sales fall by the same amount. In addition, we have documented that this phenomenon is reinforced in countries where labour law is more rigid and those whose intervention by the Troika has been necessary, because these two aspects increase the adjustment costs.

Keywords: cost behaviour; stickiness; anti-stickiness; deliberate resource commitment; adjustment costs (search for similar items in EconPapers)
JEL-codes: J30 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2018-11
New Economics Papers: this item is included in nep-cfn, nep-eec and nep-eff
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Persistent link: https://EconPapers.repec.org/RePEc:por:fepwps:609

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