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

FRB of Kansas City Research Working Paper No. 03-12

29 Pages Posted: 5 Aug 2004

See all articles by Jonathan L. Willis

Jonathan L. Willis

Federal Reserve Bank of Kansas City

John Haltiwanger

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

Russell Cooper

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

Multiple version iconThere are 2 versions of this paper

Date Written: December 2003

Abstract

This paper studies the dynamics of labor demand at the micro and aggregate level. 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.

Keywords: Adjustment Costs, Employment, Aggregate Employment

JEL Classification: E24, J23, J6

Suggested Citation

Willis, Jonathan and Haltiwanger, John C. and Cooper, Russell W., Dynamics of Labor Demand: Evidence from Plant-Level Observations and Aggregate Implications (December 2003). FRB of Kansas City Research Working Paper No. 03-12. Available at SSRN: https://ssrn.com/abstract=561262 or http://dx.doi.org/10.2139/ssrn.561262

Jonathan Willis (Contact Author)

Federal Reserve Bank of Kansas City ( email )

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

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

Russell W. Cooper

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

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