Labor Demand and the Structure of Adjustment Costs
TLDR
This paper examined the nature of the costs that firms face in adjusting labor demand in response to shocks induced by changes in output demand and prices, and empirically showed that adjustment proceeds in jumps.Abstract:
This study examines the nature of the costs that firms face in adjusting labor demand in response to shocks induced by changes in output demand and prices. Empirical work on monthly plant-level time-series data shows that adjustment proceeds in jumps. Employment is unchanged in response to small demand shocks, but moves instantaneously to a new long-run equilibrium if the shocks are large. Results in the large literature that assumes smooth adjustment are due to aggregation of this inherently nonlinear relation over subunits experiencing different shocks. The finding has implications for cyclical changes in productivity and for examining the effects of policies such as severance pay, layoff and plant-closing restrictions, and mandatory listing of job vacancies, all of which change the cost of adjusting employment.read more
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The Impact of Uncertainty Shocks
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References
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Inflation and costs of price adjustment
Eytan Sheshinski,Yoram Weiss +1 more
TL;DR: In this article, the authors discuss the problem of catalog quotes out-of-date prices and suggest that companies should consider putting out catalogs more frequently to keep up with prices.
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Estimation of dynamic labor demand schedules under rational expectations
TL;DR: In this paper, a dynamic linear demand schedule for labor is estimated and tested, based on the hypothesis of rational expectations and assumptions about the orders of the Markov processes governing technology.
Journal ArticleDOI
Temporary Layoffs in the Theory of Unemployment
TL;DR: In this article, the authors developed a theory of temporary layoffs and examined the role of unemployment insurance and of taxes in detail, and gave a detailed analysis of why employment is reduced instead of hours.