The Economics of Labor Adjustment: Mind the Gap / Russell W. Cooper, Jonathan L. Willis.

Format:

Book

Author/Creator:

Cooper, Russell W.

Contributor:

National Bureau of Economic Research.

Willis, Jonathan L.

Series:

Working Paper Series (National Bureau of Economic Research) no. w8527.

NBER working paper series no. w8527

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

The Economics of Labor Adjustment

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2001.

Summary:

We study the inferences about labor adjustment costs obtained by the 'gap methodology' of Caballero and Engel [1993] and Caballero, Engel and Haltiwanger [1997]. In that approach, the policy function of a manufacturing plant is assumed to depend on the gap between a target and the current level of employment. Using time series observations, these studies reject the quadratic cost of adjustment model and find that aggregate employment dynamics depend on the cross sectional distribution of employment gaps. We argue that these conclusions may not be justified. Instead these findings may reflect difficulties measuring the gap. Thus it appears that the gap methodology, as currently employed, may be unable to: (i) identify the costs of labor adjustment and (ii) assess the aggregate implications of labor adjustment costs.

Notes:

Print version record

October 2001.