American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
A Comment on the Economics of Labor Adjustment: Mind the Gap: Evidence from a Monte Carlo Experiment: Reply
American Economic Review
vol. 99,
no. 5, December 2009
(pp. 2267–76)
Abstract
This note responds to Christian Bayer (2009). Cooper and Willis (2004), hereafter CW, find the aggregate nonlinearities reported in Ricardo Caballero and Eduardo Engel (1993) and Caballero, Engel, and John Haltiwanger (1997) reflect mismeasurement of the employment gap, not nonlinearities in plant-level adjustment. Bayer concludes the CW result is not robust to alternative aggregate shock processes. We concur, but argue that the nonlinearity created by mismeasurement does not disappear. Instead, it is directly related to the level of the aggregate shock. The CW findings are robust for the natural case of unobserved gaps. (JEL E24, J23)Citation
Cooper, Russell, and Jonathan L. Willis. 2009. "A Comment on the Economics of Labor Adjustment: Mind the Gap: Evidence from a Monte Carlo Experiment: Reply." American Economic Review, 99 (5): 2267–76. DOI: 10.1257/aer.99.5.2267Additional Materials
JEL Classification
- E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital
- J23 Labor Demand