employment variability


Standard models of dynamic labor demand rely on the presence of
adjustment costs to explain the observed smoothness in employment patterns,
although the costs are often difficult to quantify. The experience rating
feature of the U.S. Unemployment Insurance (UI) system provides a
measurable linear cost of adjustment. Using a unique data set with
administrative data on over 8,000 firms, I estimate the effect of a
UI-induced linear adjustment cost on seasonal labor demand in retail trade.
I find strong support for the large role of adjustment costs in reducing
the employment response of firms to seasonal fluctuations in demand.

Year of Publication
Date Published
Publication Language
Citation Key
Quarterly Journal of Economics, Vol. 108, No. 4, November 1993
Anderson, P. (1992). Linear Adjustment Costs and Seasonal Labor Demand: Unemployment Insurance Experience Rating in Retail Trade. Retrieved from http://arks.princeton.edu/ark:/88435/dsp01b2773v699 (Original work published January 1992)
Working Papers