The cost of labor adjustment: Inferences from the gap

Russell Wade Cooper, Jonathan L. Willis

Research output: Contribution to journalArticle

23 Citations (Scopus)

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

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Inference
Adjustment costs
Costs
Labor
Employment growth
Hazard
Microeconomics
Optimization problem
Dynamic optimization
Indirect inference
Economics

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

Cite this

Cooper, Russell Wade ; Willis, Jonathan L. / The cost of labor adjustment : Inferences from the gap. In: Review of Economic Dynamics. 2009 ; Vol. 12, No. 4. pp. 632-647.
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The cost of labor adjustment : Inferences from the gap. / Cooper, Russell Wade; Willis, Jonathan L.

In: Review of Economic Dynamics, Vol. 12, No. 4, 01.10.2009, p. 632-647.

Research output: Contribution to journalArticle

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