Labor adjustment costs in a panel of establishments: a structural approach

Arbeitspapier

This paper estimates a structural model of the employment decision of the firm. Our establishment level data displays an extreme degree of rigidity in that employment levels are largely constant throughout our sample. This can be due to the fact that establishments face large shocks but also large adjustment costs, or alternatively that they incur no adjustment costs but that shocks are negligible. Given our identifying assumptions, we find that rigidity is due to adjustment costs and not to the shock process. We further find that these costs reduce the value of the firm as much as 5%. Finally, small fixed costs of adjustment have a large impact on entry and exit job flows.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 3091

Classification and Topics

• Classification: Wirtschaft
• Subject: Adjustment costs ; employment ; rigidity ; Arbeitsnachfrage ; Unternehmen ; Anpassungskosten ; Personalbestand ; Hysteresis ; Portugal

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Ejarque, João Miguel ; Portugal, Pedro
• Event: Veröffentlichung
• (who): Institute for the Study of Labor (IZA)
• (where): Bonn
• (when): 2007

Further information

• Handle: http://hdl.handle.net/10419/34728
• Last update: 10.03.2025, 11:44 AM CET