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Labour adjustment costs: Estimation of a dynamic discrete choice model using panel data for Greek manufacturing firms

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  • Lapatinas, Athanasios

Abstract

In this paper we estimate a dynamic structural model of employment at firm level. Our dataset consists of a balanced panel of 2790 Greek manufacturing firms. The empirical evidence of this dataset stresses three important stylized facts: (a) there are periods in which firms decide not to change their labour input, (b) there are periods of large employment changes (lumpy nature of labour adjustment) and (c) the commonality is employment spikes to be followed by smooth and low employment growth periods. Following Cooper and Haltiwanger [Cooper, R.W. and Haltiwanger, J. "On the Nature of Capital Adjustment Costs", Review of Economic Studies, 2006; 73(3); 611-633], we consider a dynamic discrete choice model of a general specification of adjustment costs including convex, non-convex and "disruption of production" components. We use a method of simulated moments procedure to estimate the structural parameters. Our results indicate considerable fixed costs in the Greek employment adjustment.

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  • Lapatinas, Athanasios, 2009. "Labour adjustment costs: Estimation of a dynamic discrete choice model using panel data for Greek manufacturing firms," Labour Economics, Elsevier, vol. 16(5), pages 521-533, October.
    • Handle: RePEc:eee:labeco:v:16:y:2009:i:5:p:521-533
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    1. Athanasios Lapatinas, 2015. "Multinational versus National Firms on Labour Adjustment Costs: A Structural Approach," Journal of Labor Research, Springer, vol. 36(4), pages 427-441, December.
    2. Matsue, Toyoki, 2019. "Employment fluctuations in a dynamic model with long-term and short-term contracts," MPRA Paper 97545, University Library of Munich, Germany.
    3. Emmanuel Dhyne & Catherine Fuss & Claude Mathieu, 2015. "Labour Demand Adjustment: Does Foreign Ownership Matter?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 77(6), pages 854-871, December.
    4. Lapatinas, Athanasios, 2015. "Multinational versus national firms on capital adjustment costs: A structural approach," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 9, pages 1-22.
    5. Jung, Sven, 2013. "Employment Adjustment in German Firms," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79696, Verein für Socialpolitik / German Economic Association.
    6. Blatter, Marc & Muehlemann, Samuel & Schenker, Samuel, 2012. "The costs of hiring skilled workers," European Economic Review, Elsevier, vol. 56(1), pages 20-35.
    7. Dimitris Papageorgiou, 2009. "Macroeconomic Implications of Alternative Tax Regimes: The Case of Greece," Working Papers 97, Bank of Greece.
    8. Dimitris Papageorgiou, 2014. "BoGGEM: a dynamic stochastic general equilibrium model for policy simulations," Working Papers 182, Bank of Greece.
    9. Coşkun, Sevgi, 2022. "Informal employment and business cycles in emerging market economies," Journal of Macroeconomics, Elsevier, vol. 74(C).
    10. Yaman, F., 2011. "The costs of adjusting labor: Evidence from temporally disaggregated data," Working Papers 11/10, Department of Economics, City University London.
    11. Yaman, F., 2016. "Structural Estimation of Labor Adjustment Costs," Working Papers 15/22, Department of Economics, City University London.
    12. Lapatinas Athanasios, 2012. "On the Interrelation of Capital and Labor Adjustment Costs at the Firm Level," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 16(3), pages 1-36, September.
    13. Jung, Sven, 2012. "Employment adjustment in German firms," Discussion Papers 80, Friedrich-Alexander University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
    14. Sven Jung, 2014. "Employment adjustment in German firms [Betriebliche Beschäftigungsanpassung in Deutschland]," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 47(1), pages 83-106, March.

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