LABOUR MARKET FLEXIBILITY AND EMPLOYMENT ADJUSTMENT: MICRO EVIDENCE FROM UK ESTABLISHMENTS |
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Authors: | HASKEL JONATHAN; KERSLEY BARBARA; MARTIN CHRISTOPHER |
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Institution: | *Department of Economics, Queen Mary and Westfield College Mile End Road, London E1 4NS, and CEPR
Department of Economics QMW |
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Abstract: | In this paper we study how firms react to demand shocks, examininghow different aspects of flexibility shape their responses.Our main findings are: (i) very few firms choose to adjust pricein response to a demand shock; (ii) firms with more flexibilityare more likely to respond to demand shocks by adjusting employmentand hours. Our results provide a microeconomic explanation forrecent macroeconomic evidence that labour input has become moreclosely aligned to the business cycle. |
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