How variable is labor input in the Italian manufacturing: the case of the pharmaceutical industry

Lorenzo Carbonari

No 140, CEIS Research Paper from Tor Vergata University, CEIS

Abstract: The aim of this paper is to study the labor demand in the Italian manufacturing, using firm-level data on pharmaceutical industry. The Italian pharmaceutical industry is characterized by the existence of long-term labor contracts, and this fact suggests to consider labor as quasi-fixed input. In order to characterize firms’ behavior we base our analysis on the restricted Generalized Leontief cost function. The choice of this flexible functional form is due to its ability to capture the input substitution patterns in presence of more than one quasi-fixed input. Therefore demand and substitution elasticities are estimated with respect to two different theoretical models: the first, QFI(1), with capital as quasi-fixed input and the second, QFI(2), with two quasi-fixed inputs, capital and labor. The choice among the two alternative specifications is based on an elasticity comparison criterion, since the two models are not nested. Our results confirm the a priori on the labor market rigidity and point out the high heterogeneity between the firms, even controlling for size and nationality

Keywords: quasi-fixed inputs; restricted Generalized Leontief; pharmaceutical industry. (search for similar items in EconPapers)
JEL-codes: C33 D24 L65 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2009-06-30, Revised 2009-06-30
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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