Nonlinear Dynamics in a Structural Model of Employment

Simon Burgess ()

Journal of Applied Econometrics, 1992, vol. 7, issue S, S101-18

Abstract: Search and matching models imply that firms' employment adjustment costs depend on the tightness of the labor market, giving rise to endogenous or nonlinear dynamics in employment. This paper sets this argument out in detail, estimating a model simultaneously explaining the long-run level of employment and the nonlinear dynamics. The main implications of the estimated model are (1) the effect of a given shock to the long-run level of employment is markedly different at different levels of employment, and (2) asymmetric business cycles result with the downswing in employment being sharper and deeper than the upswing Copyright 1992 by John Wiley & Sons, Ltd.

Date: 1992
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Working Paper: Nonlinear Dynamics in a Structural Model of Employment (1991)
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