Employment Dynamics and the Structure of Labor Adjustment Costs

Abstract

In this article we document the patterns of employment adjustment at the micro level. We find clear evidence of lumpy adjustment consistent with the presence of nonconvexities in the adjustment technology—inaction is pervasive, action spells are short-lived, and extreme adjustment episodes are responsible for a nontrivial share of employment adjustment. We also find that the probability of employment adjustment increases with the duration of inaction. The skill structure of the workforce, the type of employment contract, and the proportion of low-tenure workers, which we interpret as proxies for the magnitude of adjustment costs, all influence the probability of adjustment.

Serial entrepreneurship: impact of human capital on time to re-entry

“…Firms and individuals (workers and business owners) are identified and matched through a unique identification number, so they can be followed over time. Yearly data on business owners and paid employees 4 The Quadros de Pessoal database has been used in a diverse set of empirical works in labor and industry dynamics (e.g., Mata and Portugal 2002;Cabral andMata 2003 or Varejão andPortugal 2007).…”

Lumpy Labor Adjustment as a Propagation Mechanism of Business Cycles

“…In addition, Varejão and Portugal (2006) find that large employment adjustments (larger than 10% of the plant's labor force) account for about 66% of the total job turnover, and on average around 75% of all observed Portuguese employer do not change employment over an entire quarter.…”

“…Varejão and Portugal (2006) estimated the Weibull duration model using survey data of Portuguese employers, and found the shape parameter is in the range between 1.174 to 1.309.…”

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

“…Caballero et al (1997) report evidence of inactivity in plant-level adjustment: a large number of plants in the US choose not to adjust their employment, even when shortages are large. Similarly, Varejao and Portugal (2007) report that 75% of their large sample of Portuguese plants does not adjust employment from one quarter to the next. For an excellent survey of the employment adjustment literature up to the early nineties, the reader is prompted to Hamermesh and Pfann (1996).…”