Employment dynamics and the structure of labor adjustment costs

José Varejão, Pedro Portugal

Research output: Contribution to journalArticlepeer-review

35 Citations (Scopus)


In this article we document the patterns of employment adjustment at the micro level. We find clear evidence of lumpy adjustment consistent with the presence of nonconvexities in the adjustment technology-inaction is pervasive, action spells are short-lived, and extreme adjustment episodes are responsible for a nontrivial share of employment adjustment. We also find that the probability of employment adjustment increases with the duration of inaction. The skill structure of the workforce, the type of employment contract, and the proportion of low-tenure workers, which we interpret as proxies for the magnitude of adjustment costs, all influence the probability of adjustment.

Original languageEnglish
Pages (from-to)137-165
Number of pages29
JournalJournal Of Labor Economics
Issue number1
Publication statusPublished - Jan 2007




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