Does North American Labor Demand Adjustment Differ from that in Britain?

Authors:
Richard Fry
Working Paper:
188

This paper examines the degree of employment and hours per worker adjustment among comparable British, Canadian, and U.S. manufacturing industries. The standard adjustment cost model of dynamic labour demand, assuming nonmyopic firm expectations of the forcing variables, serves as the empirical framework. The results indicate that the estimated speeds of employment adjustment and average hours worked adjustment among British manufacturing industries resemble those of North American manufacturing industries. In addition to the analysis of comparative adjustment behavior, empirical results are also presented regarding the effect of the real wage rate on short-run labour demand.