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Francesca Di Iorio and Stefano Fachin
''Models of labour demand with fixed costs of adjustment: a generalised tobit approach''
( 2004, Vol. 3 No.31 )
Traditional models of factor demand rely upon convex and symmetric adjustment costs: however, the fortune of this highly restrictive model is due more to analytical convenience than to actual empirical relevance. In this note we first examine the model of employment adjustment under the more realistic hypothesis of fixed costs, show that it can be cast in the form of a Double Censored Random Effect Tobit Model, derive its likelihood function, and finally evaluate the empirical performance of the ML estimators through a Monte Carlo experiment. The performances, although strongly dependent on the degree of censoring, appear promising.
JEL: C5 - Econometric Modeling: General
Manuscript Received : Jul 09 2004 Manuscript Accepted : Sep 16 2004

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