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A General Model of Dynamic Labor Demand

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  • Hamermesh, Daniel S
Abstract
This study derives and estimates a dynamic model of factor demand that includes both fixed and quadratic variable costs of adjustment. Using quarterly data on the employment of mechanics at seven airlines, it finds that both types of adjustment costs characterize the dynamic constraints facing employers. Using monthly data covering production-worker employment in seven manufacturing plants, it shows that only fixed costs are important. The apparent diversity of the underlying costs of adjustment means it is difficult to draw useful inferences from macroeconometric estimates. It suggests the importance of examining broader arrays of microeconomic time series describing labor demand.
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  • Hamermesh, Daniel S, 1992. "A General Model of Dynamic Labor Demand," The Review of Economics and Statistics, MIT Press, vol. 74(4), pages 733-737, November.
    • Handle: RePEc:tpr:restat:v:74:y:1992:i:4:p:733-37
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    1. Michael Rothschild, 1971. "On the Cost of Adjustment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 85(4), pages 605-622.
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    4. Robert F. Engle & Ta-Chung Liu, 1972. "Effects of Aggregation Over Time on Dynamic Characteristics of an Econometric Model," NBER Chapters, in: Econometric Models of Cyclical Behavior, Volumes 1 and 2, pages 673-737, National Bureau of Economic Research, Inc.
    5. Card, David, 1986. "Efficient Contracts with Costly Adjustment: Short-run Employment Determination for Airline Mechanics," American Economic Review, American Economic Association, vol. 76(5), pages 1045-1071, December.
    6. Stephen Nickell, 1984. "An Investigation of the Determinants of Manufacturing Employment in the United Kingdom," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 51(4), pages 529-557.
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