TY  - JOUR
AU  - Cooper,Russell W.
AU  - Willis,Jonathan
TI  - The Cost of Labor Adjustment: Inferences from the Gap
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10006
PY  - 2003
Y2  - October 2003
UR  - http://www.nber.org/papers/w10006
L1  - http://www.nber.org/papers/w10006.pdf
N1  - Author contact info:
Russell Cooper
Department of Economics
The Pennsylvania State University
611 Kern
State College, PA 16802
E-Mail: russellcoop@gmail.com

Jonathan Willis
Federal Reserve Bank of Kansas City
1 Memorial Drive
Kansas City, MO  64198
Tel: 8168812852
Fax: 8168812199
E-Mail: jonathan.willis@kc.frb.org
AB  - We study labor adjustment costs. We specify a dynamic optimization problem at the plant-level, allowing for both convex and non-convex adjustment costs. We estimate the parameters of the adjustment process using an indirect inference procedure in which simulated moments are matched with data moments. For this study we use estimates of reduced-form adjustment functions obtained by the  gap methodology' reported in Caballero-Engel as data moments. Contrary to evidence at the micro level in support of non-convex adjustment costs, our findings indicate that piecewise quadratic adjustment costs are sufficient to match these aggregate moments.
ER  -