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Identifying Adjustment Costs of Net and Gross Employment Changes

Joao Ejarque () and Øivind Nilsen ()
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Joao Ejarque: University of Essex

No 3703, IZA Discussion Papers from Institute of Labor Economics (IZA)

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)
JEL-codes: C33 C41 E24 J23 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2008-09
New Economics Papers: this item is included in nep-bec, nep-lab and nep-mac
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Related works:
Working Paper: Identifying Adjustment Costs of Net and Gross Employment Changes (2008) Downloads
Working Paper: Identifying Adjustment Costs of Net and Gross Employment Changes (2007) Downloads
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