Employment Changes, the Structure of Adjustment Costs, and Firms' Size
Øivind Nilsen (),
Kjell G Salvanes () and
Fabio Schiantarelli ()
No A1-4, 10th International Conference on Panel Data, Berlin, July 5-6, 2002 from International Conferences on Panel Data
In this paper we analyze the pattern of employment adjustment at the plant level using a rich data set for Norway. We first document the stylized facts about employment changes in small and large plants. The data reveals important differences across size classes. In particular, episodes of zero net employment changes are more frequent for smaller plants. A simple "q" model of labor demand is then developed, allowing for the presence of fixed, linear and convex components in adjustment costs. Econometric estimation supports the importance of departing from traditional models of labor demand based solely on symmetric convex adjustment costs. Fixed (or linear) components of adjustment costs are important. There is, moreover, evidence that fixed costs contain a component that are unrelated to size, in addition to a components proportional to size. As a result, the range of inaction is wider for smaller plants. Finally, the quadratic components of costs are asymmetric and, although some ambiguities exist about the nature of the asymmetry, the more general models indicate that it is more costly at the margin to contract employment than to expand it.
Keywords: Adjustment costs; employment demand; size (search for similar items in EconPapers)
JEL-codes: D21 C24 E24 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:cpd:pd2002:a1-4
Access Statistics for this paper
More papers in 10th International Conference on Panel Data, Berlin, July 5-6, 2002 from International Conferences on Panel Data
Bibliographic data for series maintained by Sune Karlsson ().