Partial Adjustment without Apology

Robert King () and Julia Kathryn Thomas

No 1999-E12, GSIA Working Papers from Carnegie Mellon University, Tepper School of Business

Abstract: Many kinds of economic behavior appear to be governed by discrete and occasional individual choices. Yet, econometric partial adjustment models perform well, though imperfectly, at the aggregate level. Analyzing the classic employment adjustment problem, we show why discrete and occasional microeconomic adjustment will be well described by a new form of the partial adjustment model that aggregates the actions of a large number of heterogenous producers. Moreover, in contrast to existing models of discrete adjustment, our generalized partial adjustment model is sufficiently tractable to allow extension to general equilibrium.

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Related works:
Working Paper: Partial adjustment without apology (2004)
Working Paper: Partial Adjustment without Apology (2003)
Working Paper: Partial Adjustment without Apology (2005)
Working Paper: Partial Adjustment Without Apology (2004)
Journal Article: PARTIAL ADJUSTMENT WITHOUT APOLOGY (2006)
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