Inventories, Employment and Hours

Marzio Galeotti, Louis Maccini () and Fabio Schiantarelli

No 458, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: The purpose of this paper is to develop a model that integrates inventory and labor decisions. We extend a model of inventory behavior to include a detailed specification of the role of labor input in the production process and of the costs associated with it. In particular, we distinguish between employment, hours and effort per worker, and allow for adjustment costs associated with employment changes. We assume that the requirement function for effective hours has a general trans-logarithmic form, and derive an estimable system of Euler equations for inventories and employment with implied cross-equation restrictions. The econometric results shed light on several important topics, including the shape of the marginal cost of output and the role of labor hoarding as an explanation of procyclical productivity and the persistence of inventory stocks. Moreover, they raise questions about the adequacy of commonly used specifications such as Cobb-Douglas approximations to the production process and the definition of labor input as the product of employment and effective hours worked per worker.

Keywords: procyclical productivity; labor adjustment costs; hours; employment; Inventories (search for similar items in EconPapers)
JEL-codes: D24 E23 E24 J23 J24 J32 (search for similar items in EconPapers)
Pages: 55 pages
Date: 2002-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published - published in: Journal of Monetary Economics, 2005, 52 (3), 575-600

Downloads: (external link)
https://docs.iza.org/dp458.pdf (application/pdf)

Related works:
Journal Article: Inventories, employment and hours (2005)
Working Paper: Inventories, Employment and Hours (2002)
Working Paper: Inventories, employment and hours (2002)
Working Paper: Inventories Employment and Hours (2002)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp458

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().