The cost of labor adjustment: Inferences from the gap

Russell Cooper, Jonathan L. Willis

Research output: Contribution to journalArticle

23 Scopus citations

Abstract

This paper studies the aggregate implications of micro-level labor adjustment costs. Caballero and Engel [Caballero, R., Engel, E., 1993. Microeconomic adjustment hazards and aggregate dynamics. Quarterly Journal of Economics 108, 313-358] find a dependence of aggregate employment growth on the cross sectional distribution of "employment gaps." This paper uses those results as moments in an indirect inference procedure to infer the underlying labor adjustment costs. We specify a dynamic optimization problem at the plant level, allowing for both convex and non-convex adjustment costs. Consistent with evidence at the micro level, our findings indicate that non-convex adjustment costs are necessary to match these aggregate moments.

Original languageEnglish (US)
Pages (from-to)632-647
Number of pages16
JournalReview of Economic Dynamics
Volume12
Issue number4
DOIs
StatePublished - Oct 1 2009

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

Fingerprint Dive into the research topics of 'The cost of labor adjustment: Inferences from the gap'. Together they form a unique fingerprint.

  • Cite this