Non-linear error correction, asymmetric adjustment and cointegration

This article links the intertemporal choice model with the non-linear error correction (NEC) model. It has three main components. First, it outlines a model of non-linear error correction, in which the linear error correction term ?Xt (the vector time series Xt is cointegrated, is the cointegrating vector) is replaced by the non-linear term g(?Xt), where g(.) is a non-linear function. Second, several types of asymmetries and the existence of multiple equilibria are discussed. The implications for the NEC model of trending targets are also explained. Third, it is shown that non-linear error correction is present in a trivariate series of UK employment, wage and capital stock.Publicad

Nonlinear error correction, asymmetric adjusment and cointegration

This paper has three main components. First, it outlines a model of nonlinear error correction (NEC) in which the linear error correction term a'Xt (the vector time series Xt is cointegrated, a is the cointegrating vector) is replaced by the nonlinear term g(a'X),ˇ where g(.) is a nonlinear function. Second, several types of asymmetries are discussed. The NEC model is shown to have an underlying structural model in the form of an adjustment cost model, with asymmetric adjustment costs. The implications for the NEC model of trending targets are explained. Third, it is shown that nonlinear error correction is present in a trivariate series of UK employment, wage, and capital stock

Non-linear error correction, asymmetric adjustment and cointegration.

This article links the intertemporal choice model with the non-linear error correction (NEC) model. It has three main components. First, it outlines a model of non-linear error correction, in which the linear error correction term ?Xt (the vector time series Xt is cointegrated, is the cointegrating vector) is replaced by the non-linear term g(?Xt), where g(.) is a non-linear function. Second, several types of asymmetries and the existence of multiple equilibria are discussed. The implications for the NEC model of trending targets are also explained. Third, it is shown that non-linear error correction is present in a trivariate series of UK employment, wage and capital stock.Non-linear error correction; Asymmetric adjustment; Multiple equilibria; Intertemporal optimization;

Heterogeneity among Displaced Workers

We combine post-displacement survey data with information from a displacing firm's personnel files in order to reveal sources of worker heterogeneity in search time and wage losses. First, we detail how experience-related characteristics affect workers' labour market careers during a period of three years after the bankruptcy of the firm. We find that wage losses are large. Interestingly, firm, rank, or job tenure do not explain observed wage differences. Idiosyncratic ability, job rotations prior to displacement, and differences in pre- and post-displacement job characteristics contribute most to observed variations in wages. The individual post-displacement labor market histories allow for testing the Blanchard-Diamond (1994) ranking model for which we find no support. We then develop a dynamic reservation wage updating model. The method of updating is based on the simple idea that job seekers are informed about successful matches of their former colleagues (Rees, 1966; Granovetter, 1974). The model fits the data well.idiosyncratic ability, mass lay-off, social networks, unemployment

Workforce Reorganization and the Worker

In this paper we study the joint decision process of changing the structure of jobs and laying off individual workers in a firm that downsizes its workforce. A hierarchical decision model is proposed and estimated using personnel data from a firm in demise comparing the characteristics of the individual workers and the structure of the firm's labour force before and after its reorganization. Our results show that workers in jobs in the top levels of each skill group's hierarchy are better protected against downsizing due to larger productivity shocks and larger firing costs.hierarchies, restructuring, control span, job displacement

Markets for Reputation: Evidence on Quality and Quantity in Academe

We develop a theory of the market for individual reputation, an indicator of regard by one’s peers and others. The central questions are: 1) Does the quantity of exposures raise reputation independent of their quality? and 2) Assuming that overall quality matters for reputation, does the quality of an individual’s most important exposure have an extra effect on reputation? Using evidence for academic economists, we find that, conditional on its impact, the quantity of output has no or even a negative effect on each of a number of proxies for reputation, and very little evidence that a scholar's most influential work provides any extra enhancement of reputation. Quality ranking matters more than absolute quality. Data on mobility and salaries show, on the contrary, substantial positive effects of quantity, independent of quality. We test various explanations for the differences between the determinants of reputation and salary.mobility, quality/quantity trade-off, salary determination