Labor adjustment costs in a destination country: The case of Mexico

Raymond Robertson, Donald H. Dutkowsky

Research output: Contribution to journalArticle

9 Scopus citations

Abstract

Rodrik [Rodrik, D., 1997. Has Globalization Gone Too Far? Institute for International Economics, Washington, DC.] argues that firms use the threat of moving to low-cost (generally developing) markets to make employment more flexible at home. Although a large literature documents significant adjustment costs in developed countries, we know little about their size and importance in developing countries that receive capital. We employ monthly Mexican data from the GATT-NAFTA period to estimate adjustment costs in Mexico. We consider adjustment costs for production and non-production workers and allow for asymmetry. While patterns of adjustment costs are similar as in developed countries, adjustment costs in Mexico are generally an order of magnitude smaller.

Original languageEnglish (US)
Pages (from-to)29-54
Number of pages26
JournalJournal of Development Economics
Volume67
Issue number1
DOIs
StatePublished - Jan 1 2002

Keywords

  • Adjustment cost
  • Asymmetry
  • Dynamic labor demand

ASJC Scopus subject areas

  • Development
  • Economics and Econometrics

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