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Are Adjustment Costs for Labor Asymmetric? An Econometric Test on Panel Data for Italy

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  • Jaramillo, Fidel
  • Schiantarelli, Fabio
  • Sembenelli, Alessandro

Abstract

In this paper we analyze the structure of adjustment costs for labor. In particular, the question whether hiring and firing costs are asymmetric is addressed. We maintain the standard assumption of quadratic adjustment costs, but allow the multiplicative coefficient to differ for the firing and hiring regime. The Euler equations for this problem can be combined into a general model that nests the one with symmetric adjustment costs. The model can be conveniently estimated and the parameter restrictions implied by symmetry easily tested. We also extend the model to allow for variable adjustment coefficients. In the empirical application we use a panel data collected by Ceris on 52 large Italian firms for the period 1958-1988. The general conclusion from the econometric testing is that the hypothesis of symmetric adjustment costs is rejected by the data. Copyright 1993 by MIT Press.

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  • Jaramillo, Fidel & Schiantarelli, Fabio & Sembenelli, Alessandro, 1993. "Are Adjustment Costs for Labor Asymmetric? An Econometric Test on Panel Data for Italy," The Review of Economics and Statistics, MIT Press, vol. 75(4), pages 640-648, November.
    • Handle: RePEc:tpr:restat:v:75:y:1993:i:4:p:640-48
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    Cited by:

    1. Fabio Pieri, 2018. "Vertical organization of production and firm growth," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 27(1), pages 83-106.
    2. Kölling, Arnd, 1998. "Dynamische Arbeitsnachfrage und asymmetrisches Anpassungsverhalten in der Bundesrepublik Deutschland : eine Untersuchung mit Daten aus dem IAB-Betriebspanel (Dynamic labour demand and asymmetrical adj," Mitteilungen aus der Arbeitsmarkt- und Berufsforschung, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 31(4), pages 637-647.
    3. Marcela Eslava & John Haltiwanger & Adriana Kugler & Maurice Kugler, 2010. "Factor Adjustments after Deregulation: Panel Evidence from Colombian Plants," The Review of Economics and Statistics, MIT Press, vol. 92(2), pages 378-391, May.
    4. Arpaia, Alfonso & Pérez, Esther & Pichelmann, Karl, 2009. "Understanding labour income share dynamics in Europe," MPRA Paper 15649, University Library of Munich, Germany.
    5. Goux, Dominique & Maurin, Eric & Pauchet, Marianne, 2001. "Fixed-term contracts and the dynamics of labour demand," European Economic Review, Elsevier, vol. 45(3), pages 533-552, March.
    6. Francine Lafontaine & Jagadeesh Sivadasan, 2009. "Do Labor Market Rigidities Have Microeconomic Effects? Evidence from within the Firm," American Economic Journal: Applied Economics, American Economic Association, vol. 1(2), pages 88-127, April.
    7. Kenji Azetsu & Mototsugu Fukushige, 2005. "Job Security Laws and Structural Change in the Japanese Labor Market," Discussion Papers in Economics and Business 05-31, Osaka University, Graduate School of Economics.
    8. Kazuyuki Inagaki, 2012. "Labor adjustment in the Japanese health care industry: some empirical evidence," Health Economics, John Wiley & Sons, Ltd., vol. 21(2), pages 173-177, February.
    9. Feve, Patrick, 2002. "Solving labor demand models under asymmetric adjustment costs," Journal of Economic Dynamics and Control, Elsevier, vol. 26(5), pages 797-809, May.
    10. Palm, Franz C. & Pfann, Gerard A., 1998. "Sources of asymmetry in production factor dynamics," Journal of Econometrics, Elsevier, vol. 82(2), pages 361-392, February.
    11. Kenji Azetsu & Mototsugu Fukushige, 2009. "The estimation of asymmetric adjustment costs for the number of workers and working hours - empirical evidence from Japanese industry data," Applied Economics Letters, Taylor & Francis Journals, vol. 16(10), pages 995-998.
    12. Zuzana Janko, 2008. "Nominal Wage Contracts, Labor Adjustment Costs and the Business Cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(2), pages 434-448, April.
    13. Martin Bugeja & Meiting Lu & Yaowen Shan, 2015. "Cost Stickiness in Australia: Characteristics and Determinants," Australian Accounting Review, CPA Australia, vol. 25(3), pages 248-261, September.
    14. Bottasso, Anna & Sembenelli, Alessandro, 2001. "Market power, productivity and the EU Single Market Program: Evidence from a panel of Italian firms," European Economic Review, Elsevier, vol. 45(1), pages 167-186, January.
    15. Fabio Pieri, 2015. "Vertical organization of production and firm growth behavior," Working Papers 1508, Department of Applied Economics II, Universidad de Valencia.
    16. Todtenhaupt, Maximilian & Voget, Johannes, 2018. "International Taxation and Productivity Effects of M&As," VfS Annual Conference 2018 (Freiburg, Breisgau): Digital Economy 181548, Verein für Socialpolitik / German Economic Association.
    17. Carlo Gianelle & Giuseppe Tattara, 2014. "Vacancy chains and the business cycle. Stringing together job-to-job transitions in micro data," International Journal of Manpower, Emerald Group Publishing Limited, vol. 35(8), pages 1212-1235, October.
    18. 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.
    19. Jung, Sven, 2012. "Employment adjustment in German firms," Discussion Papers 80, Friedrich-Alexander University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
    20. Cabo, Francisco & Martín-Román, Ángel L., 2017. "Dynamic collective bargaining. Frictional effects under open-shop industrial relations," MPRA Paper 77562, University Library of Munich, Germany.
    21. 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.
    22. Francisco Cabo & Angel Martín-Román, 2019. "Dynamic collective bargaining and labor adjustment costs," Journal of Economics, Springer, vol. 126(2), pages 103-133, March.
    23. Lucia Foster, 1999. "Employment Adjustment Costs and Establishment Characteristics," Working Papers 99-15, Center for Economic Studies, U.S. Census Bureau.
    24. Todtenhaupt, Maximilian & Voget, Johannes, 2017. "International taxation and productivity effects of M&As," ZEW Discussion Papers 17-014, ZEW - Leibniz Centre for European Economic Research.
    25. Kölling, Arnd, 1998. "Dynamische Arbeitsnachfrage und asymmetrisches Anpassungsverhalten in der Bundesrepublik Deutschland : eine Untersuchung mit Daten aus dem IAB-Betriebspanel (Dynamic labour demand and asymmetrical adj," Mitteilungen aus der Arbeitsmarkt- und Berufsforschung, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 31(4), pages 637-647.

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