Identifying Adjustment Costs of Net and Gross Employment Changes

João Miguel Ejarque and Øivind Nilsen

Economics Discussion Papers from University of Essex, Department of Economics

Abstract: A relatively unexplored question in dynamic labour demand regards the source of adjustment costs, whether they depend on net or gross changes in employment. We estimate a structural model of dynamic labour demand where the firm faces adjustment costs related to gross and net changes in its workforce. We focus on matching quarterly moments of hiring and of net changes in employment from a panel of establishments. The main component of adjustment costs in our panel is quadratic adjustment costs to gross changes in employment. We also estimate that adjustment costs have a large economic cost, roughly cutting the value of our establishments in half.

Keywords: Employment; adjustment costs; establishment level data; structural estimation (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (9)

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Working Paper: Identifying Adjustment Costs of Net and Gross Employment Changes (2008)
Working Paper: Identifying Adjustment Costs of Net and Gross Employment Changes (2007)
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