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| Author: | Hamermesh, D. S. Pfann, G. A. |
| Title: | Adjustment costs in factor demand |
| Journal: | Journal of Economic Literature
1996 : SEP, VOL. 34:3, p. 1264-1292 |
| Index terms: | LABOUR DEMAND LABOUR COSTS INVESTMENT |
| Language: | eng |
| Abstract: | Business change their demand for inputs more slowly than the shocks to input demand warrant. The standard explanation for this slow adjustment is that, because the firm must incur adjustment costs that are inherent in the act of changing the amount of the input used, the response to shocks will not be instantaneous. This slowness need not result from imperfect expectations or short-run supply inelasticity in factor markets: Even if it did not face such problems, the firm might still not immediately alter its use of inputs in response to shocks. |
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