The Cost of Labor Adjustment: Inferences from the Gap

Russell W. Cooper and Jonathan Willis

No 10006, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study labor adjustment costs. We specify a dynamic optimization problem at the plant-level, allowing for both convex and non-convex adjustment costs. We estimate the parameters of the adjustment process using an indirect inference procedure in which simulated moments are matched with data moments. For this study we use estimates of reduced-form adjustment functions obtained by the gap methodology' reported in Caballero-Engel as data moments. Contrary to evidence at the micro level in support of non-convex adjustment costs, our findings indicate that piecewise quadratic adjustment costs are sufficient to match these aggregate moments.

JEL-codes: E24 J23 (search for similar items in EconPapers)
Date: 2003-10
New Economics Papers: this item is included in nep-lab
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Published as Cooper, Russell W. and Jonathan L. Willis. "The Cost of Labor Adjustment: Inferences from the Gap." Review of Economic Dynamics 12, 4 (October 2009): 632-647 .

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Related works:
Journal Article: The Cost of Labor Adjustment: Inferences from the Gap (2009)
Working Paper: The cost of labor adjustment: inferences from the gap (2002)
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