TY - JOUR
T1 - The cost of labor adjustment
T2 - Inferences from the gap
AU - Cooper, Russell
AU - Willis, Jonathan L.
N1 - Funding Information:
✩ Comments from the editor and referees are much appreciated. The authors thank the NSF for financial support. Cooper thanks the Federal Reserve Bank of Minneapolis for its hospitality during revisions of this manuscript. The views expressed herein are solely those of the authors and do not necessarily reflect the views of the Federal Reserve Bank of Kansas City, the Federal Reserve Bank of Minneapolis or the Federal Reserve System. * Corresponding author at: Federal Reserve Bank of Kansas City, Research Department, 925 Grand Boulevard, Kansas City, MO, USA. E-mail addresses: [email protected] (R. Cooper), [email protected] (J.L. Willis).
PY - 2009/10
Y1 - 2009/10
N2 - 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.
AB - 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.
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U2 - 10.1016/j.red.2008.12.001
DO - 10.1016/j.red.2008.12.001
M3 - Article
AN - SCOPUS:69249219195
SN - 1094-2025
VL - 12
SP - 632
EP - 647
JO - Review of Economic Dynamics
JF - Review of Economic Dynamics
IS - 4
ER -