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Employment Adjustment at the Firm Level. A Theoretical Model and an Empirical Investigation for West German Manufacturing Firms
Author(s) -
Smolny Werner
Publication year - 2002
Publication title -
labour
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.403
H-Index - 34
eISSN - 1467-9914
pISSN - 1121-7081
DOI - 10.1111/1467-9914.00187
Subject(s) - monopolistic competition , german , economics , competition (biology) , volatility (finance) , product market , panel data , labor demand , manufacturing , empirical research , industrial organization , labour economics , business , microeconomics , econometrics , monopoly , ecology , philosophy , wage , archaeology , epistemology , marketing , incentive , biology , history
In this paper, employment adjustment at the firm level is estimated with a large panel of business survey data from West German manufacturing. The specification is based on a framework of monopolistic competition in the product market. Special emphasis is devoted to the analysis of the impact of demand uncertainty, capacity constraints, technological change and competition. The empirical results reveal that demand uncertainty and capacity constraints significantly affect employment adjustment. Innovative firms are more successful; they increase employment and exhibit a higher utilization of capacities. Employment adjustment also depends on competition. In monopolistic markets, the volatility of employment is higher.