Factor Adjustments after Deregulation: Panel Evidence from Colombian Plants
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CitationEslava, Marcela, John Haltiwanger, Adriana Kugler and Maurice Kugler. “Factor Adjustments after Deregulation: Panel Evidence from Colombian Plants.” CID Working Paper Series 2008.184, Harvard University, Cambridge, MA, September 2008.
AbstractWe analyze employment and capital adjustments using plant data from the Colombian Annual Manufacturing Survey. We estimate adjustment functions for capital and labor as a non-linear function of the gaps between desired and actual factor levels, allowing for interdependence in adjustments of the two factors. In addition to non-linear employment and capital adjustments in response to market fundamentals, we find that capital shortages reduce hiring and labor surpluses reduce capital shedding. We also find that after factor market deregulation in Colombia in 1991, factor adjustment hazards increased on the job destruction and capital formation margins. Finally, we find that completely eliminating frictions in factor adjustment would yield a substantial increase in aggregate productivity through improved allocative efficiency. Yet, the actual impact of the Colombian deregulation on aggregate productivity through factor adjustment was modest.
Citable link to this pagehttps://nrs.harvard.edu/URN-3:HUL.INSTREPOS:37366196