Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/34728
Authors: 
Ejarque, João Miguel
Portugal, Pedro
Year of Publication: 
2007
Series/Report no.: 
IZA Discussion Papers 3091
Abstract: 
This paper estimates a structural model of the employment decision of the firm. Our establishment level data displays an extreme degree of rigidity in that employment levels are largely constant throughout our sample. This can be due to the fact that establishments face large shocks but also large adjustment costs, or alternatively that they incur no adjustment costs but that shocks are negligible. Given our identifying assumptions, we find that rigidity is due to adjustment costs and not to the shock process. We further find that these costs reduce the value of the firm as much as 5%. Finally, small fixed costs of adjustment have a large impact on entry and exit job flows.
Subjects: 
Adjustment costs
employment
rigidity
Document Type: 
Working Paper

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