Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/119630
Authors: 
Galeotti, Marzio
Maccini, Louis J.
Schiantarelli, Fabio
Year of Publication: 
2002
Series/Report no.: 
Nota di Lavoro, Fondazione Eni Enrico Mattei 24.2002
Abstract: 
The purpose of this paper is to develop a model that integrates inventory and labor decisions. We extend a model of inventory behavior to include a detailed specification of the role of labor input in the production process and of the costs associated with it. In particular, we distinguish between employment, hours and effort per worker, and allow for adjustment costs associated with employment changes. We assume that the requirement function for effective hours has a general trans-logarithmic form, and derive an estimable system of Euler equations for inventories and employment with implied cross-equation restrictions. The econometric results shed light on several important topics, including the shape of the marginal cost of output and the role of labor hoarding as an explanation of procyclical productivity and the persistence of inventory stocks. Moreover, they raise questions about the adequacy of commonly used specifications such as Cobb-Douglas approximations to the production process and the definition of labor input as the product of employment and effective hours worked per worker.
Subjects: 
Inventories
employment
hours
labor adjustment costs
procyclical productivity
JEL: 
D24
E23
E24
J23
J24
J32
Document Type: 
Working Paper

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