Dynamics of Labor Demand: Evidence from Plant-Level Observations and Aggregate Implications

29 Pages Posted: 16 Feb 2004 Last revised: 12 Mar 2013

See all articles by Russell Cooper

Russell Cooper

University of Texas at Austin - Department of Economics; National Bureau of Economic Research (NBER)

John Haltiwanger

University of Maryland - Department of Economics; National Bureau of Economic Research (NBER); Institute for the Study of Labor (IZA)

Jonathan L. Willis

Federal Reserve Bank of Kansas City

Multiple version iconThere are 2 versions of this paper

Date Written: February 2004

Abstract

This paper studies the dynamics of labor demand at the plant and aggregate levels. The correlation of hours and employment growth is negative at the plant level and positive in aggregate time series. Further, hours and employment growth are about equally volatile at the plant level while hours growth is much less volatile than employment growth in the aggregate data. Given these differences, we specify and estimate the parameters of a plant-level dynamic optimization problem using simulated method of moments to match plant-level observations. Our findings indicate that non-convex adjustment costs are critical for explaining plant-level moments on hours and employment. Aggregation generates time series implications which are broadly consistent with observation. Further, we find that a model with quadratic adjustment costs alone can also broadly match the aggregate facts.

Suggested Citation

Cooper, Russell W. and Haltiwanger, John C. and Willis, Jonathan, Dynamics of Labor Demand: Evidence from Plant-Level Observations and Aggregate Implications (February 2004). NBER Working Paper No. w10297. Available at SSRN: https://ssrn.com/abstract=499322

Russell W. Cooper (Contact Author)

University of Texas at Austin - Department of Economics ( email )

Austin, TX 78712
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

John C. Haltiwanger

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States
301-405-3504 (Phone)
301-405-3542 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Jonathan Willis

Federal Reserve Bank of Kansas City ( email )

1 Memorial Dr.
Kansas City, MO 64198
United States
816-881-2852 (Phone)
816-881-2199 (Fax)

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