Labour adjustment costs: Estimation of a dynamic discrete choice model using panel data for Greek manufacturing firms

This paper examines whether multinationals differ in their employment adjustment from domestic companies, using a panel of 5,544 Belgian firms observed between 1998 and 2005. More precisely, we estimate labour adjustment costs by worker and firm types. We propose a new flexible specification that takes into account the role of firm size in adjustment costs. Our results indicate that adjusting white-collar employment is around half as costly for multinational firms (MNFs) as for domestic firms of the same size. The remaining differential in adjustment costs between MNFs and domestic firms might result, among other things, from multinationals' stronger bargaining power.

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“…Only 7.2% of the observations in our estimation sample compared to 37% in Ejarque and Nilsen (), who use quarterly data, and 57% in Lapatinas ().…”

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confidence: 76%

Labour Demand Adjustment: Does Foreign Ownership Matter?

2015

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“…18 This simulated data set is used to calculate the model analogues of the moments we obtained using actual data. Following the relevant literature (Cooper and Haltiwanger 2006;Bayraktar 2002;Bayraktar et al 2005;Lapatinas 2009;Lapatinas 2012) the three key moments of the firm level adjustment dynamics that we seek to match are the serial correlation in investment rate, the frequency of positive investment spike observations (more than 20 percent investment) and the frequency of negative investment observations. These moments are chosen partly due to their prominence in the literature and partly due to their informativeness of the underlying structural parameters, which we estimate.…”

Section: Estimation Method: Methods Of Simulated Momentsmentioning

confidence: 99%

“…The model is relatively similar to the ones used by Cooper and Haltiwanger (2006), Lapatinas (2009), Lapatinas (2012. 11 For an extensive review see Hamermesh and Pfann (1996).…”

Section: Theoretical Modelmentioning

confidence: 99%

“…Our We first monitor if the Belgian micro data set supports the presence of both convex and non-convex components of adjustment costs, namely -based on the evidence of our data set-we structurally estimate a dynamic discrete choice model with a general specification of adjustment costs including both convex and nonconvex components (see Cooper and Haltiwanger 2006;Cooper and Willis 2001;Lapatinas 2009;Lapatinas 2012;Cooper et al 2015). The model is not differentiable in investment and has to be solved numerically.…”

Section: Introductionmentioning

confidence: 99%

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Multinational versus National Firms on Capital Adjustment Costs: A Structural Approach

Λαπατίνας

2015

Economics

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This paper provides an alternative perspective on the firm-level empirical analysis of the relation between foreign ownership and capital demand adjustment in host countries. The author estimates a dynamic structural model of investment on a sample of 4672 Belgian firms for the period [2003][2004][2005][2006][2007][2008][2009][2010], permitting him to distinguish the 'ownership status' of firms. He considers a dynamic discrete choice model of a general specification of adjustment costs including convex and non-convex components. The author uses the method of simulated moments in order to estimate the structural parameters. His results indicate that multinationals' affiliates face lower capital adjustment costs than national firms. Open-Assessment E-Journal, 9 (2015-16). http:// dx.doi. org/10.5018/economics-ejournal.ja.2015-16 www.economics-ejournal.org 1 IntroductionThe impact of the multinational firms (MNFs) on the world economy has been rapidly escalated over the last decades. Governments all over the world are concerned about Foreign Direct Investment (FDI) flows, especially in European countries where a substantial share of productive activities is under foreign control. Thus, there is a widespread fear in the European Union (EU) that foreigners are gaining too much economic control over the countries. Capital markets have become increasingly global over the last 20 years and the impact of globalization on them is a central issue in the political economy and corporate finance literature. However, there are contradictory beliefs as global integration of markets can be seen as having two directly opposite effects on the cost of equity capital. On the one hand, the removal of barriers to foreign investment means that the risk premiums on securities are falling because the risk of these securities can be shared among more investors -and more efficient spreading of risks among investors with globally diversified portfolios means lower required returns and higher stock prices. On the other hand, the increasing integration of both capital markets and real business activity resulting from continued overseas expansion by multinationals, implies a greater degree of synchronization among various international capital markets -that is, a greater tendency for all markets to move together. Such greater correlation among national capital markets means reduced benefits to investors from global diversification; hence, a higher cost of capital.In a recent debate on the effects of the growing international integration on the capital market, attention has been drawn to evaluate the impact of trade on investment and capital demand elasticity. However, there might be other paths through which globalization influences the capital market. Such a path may be the effect on capital adjustment costs, since higher adjustment costs trigger lessvolatile responses of investment to any exogenous shock to capital demand.There are good reasons to expect that MNFs are potentially more flexible in adjusting their capital. First, M...

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“…Nilsen, 2008, and 57% in Lapatinas, 2009). Thus, we do not allow for the presence of lump-sum adjustment costs in our specification.…”

Section: Navaretti Et Al 2003mentioning

confidence: 95%

Labour Demand Adjustment: Does Foreign Ownership Matter?

Dhyne

Fuss

Mathieu³

2010

SSRN Journal

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Labour adjustment costs: Estimation of a dynamic discrete choice model using panel data for Greek manufacturing firms

Cited by 16 publications

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Labour Demand Adjustment: Does Foreign Ownership Matter?

Labour Demand Adjustment: Does Foreign Ownership Matter?

Multinational versus National Firms on Capital Adjustment Costs: A Structural Approach

Labour Demand Adjustment: Does Foreign Ownership Matter?

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