Dynamic modelling of stochastic demand for manufacturing employment (Q1188877)

This monograph analyzes the demand for two types of labor (blue and white collar employment) in the manufacturing sector of the Netherlands and the U.K. The methodology is based on work by \textit{T. J. Sargent} [``Estimation of dynamic labor demand schedules under rational expectations'', J. Political Economy 86, 1009-1044 (1978)]: the firm's objective is the maximization of its expected present value subject to a production function and an adjustment cost function. Several specifications of these functions are investigated; in particular, it is argued that a quadratic adjustment cost is implausible, and an alternative (asymmetric) functional form is proposed. The problems caused by the nonstationarity of real wage costs and capital stocks are also discussed.