The Cost of Labor Adjustment: Inferences from the Gap

Russell Cooper and Jonathan Willis

Review of Economic Dynamics, 2009, vol. 12, issue 4, 632-647

Abstract: This paper studies the aggregate implications of micro-level labor adjustment costs. Caballero and Engel (1993) find a dependence of aggregate employment growth on the cross sectional distribution of "employment gaps." This paper uses those results as moments in an indirect inference procedure to infer the underlying labor adjustment costs. We specify a dynamic optimization problem at the plant level, allowing for both convex and non-convex adjustment costs. Consistent with evidence at the micro level, our findings indicate that non-convex adjustment costs are necessary to match these aggregate moments. (Copyright: Elsevier)

Keywords: Aggregate employment; Employment; Adjustment costs (search for similar items in EconPapers)
JEL-codes: E24 J23 J6 (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (51)

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Working Paper: The cost of labor adjustment: inferences from the gap (2002)
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DOI: 10.1016/j.red.2008.12.001

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