the adjustment cost model of the firm duality and productive efficiency we present the theoretical foundation for an adjustment cost technology that supports the intertemporal production decision making behavior using the directional distance function dynamic input efficiency measures are developed that can separate out the impact of variable and dynamic factors inefficiency levels an approach to implement this theory in a nonparametric fashion is developed and applied to an unbalanced panel of dutch glasshouse firms the application finds overuse of all variable inputs and overcapitalization of installations the overall dynamic efficiency gain of 16 remains possible with allocative inefficiencies indicating underinvestment in structures and installations a comparison of static and dynamic efficiency measures finds that the static overall cost inefficiency is overestimated with technical inefficiency being overstated and allocative inefficiency being understated

aspects of labor market adjustments in japan this article discusses some aspects of labor market adjustments in japan that may be relevant to the low unemployment rate there japanese statistics treat kyugyosha persons not at work as being employed but some of these workers would be counted as unemployed in the united states the kyugyosha group appears to increase in size during downturns and decreases during upturns suggesting that temporarily laid off persons are an important part of this group japanese employers evidently rely less on employment adjustments and more on adjustments in hours of work and inventory while employers in the united states rely more on employment adjustments to deal with cyclical changes in product demand japanese manufacturing employment became less sensitive and hours of work more sensitive to demand shocks after the introduction of the employment insurance law in 1975

measurement of dynamic efficiency a directional distance function parametric approach this research proposes a parametric estimation of the structural dynamic efficiency measures proposed by silva and oude lansink 2009 overall technical and allocative efficiency measurements are derived based on a directional distance function and the duality between this function and the optimal value function the applicability of the parametric proposal is illustrated by assessing dynamic efficiency ratings for a sample of dutch dairy farms observed from 1995 to 2005

markups aggregation and inventory adjustment in this paper i suggest a unified explanation for two puzzles in the inventory literature first estimates of inventory speeds of adjustment in aggregate data are very small relative to the apparent rapid reaction of stocks to unanticipated variations in sales second estimates of inventory speeds of adjustment in firm level data are significantly higher than in aggregate data the paper develops a multisector model where inventories are held to avoid stockouts and price markups vary along the business cycle the omission of countercyclical markup variations from inventory targets introduces a downward bias in estimates of adjustment speeds obtained from partial adjustment models when the cyclicality of markups differs across sectors this downward bias is shown to be more severe with aggregate rather than firm level data similar results apply not only to inventories but also to labor and prices montercarlo simulations of a calibrated version of the model suggest that these biases are quantitatively significant

some models for estimating technical and scale inefficiencies in data envelopment analysis in management contexts mathematical programming is usually used to evaluate a collection of possible alternative courses of action en route to selecting one which is best in this capacity mathematical programming serves as a planning aid to management data envelopment analysis reverses this role and employs mathematical programming to obtain ex post facto evaluations of the relative efficiency of management accomplishments however they may have been planned or executed mathematical programming is thereby extended for use as a tool for control and evaluation of past accomplishments as well as a tool to aid in planning future activities the ccr ratio form introduced by charnes cooper and rhodes as part of their data envelopment analysis approach comprehends both technical and scale inefficiencies via the optimal value of the ratio form as obtained directly from the data without requiring a priori specification of weights and or explicit delineation of assumed functional forms of relations between inputs and outputs a separation into technical and scale efficiencies is accomplished by the methods developed in this paper without altering the latter conditions for use of dea directly on observational data technical inefficiencies are identified with failures to achieve best possible output levels and or usage of excessive amounts of inputs methods for identifying and correcting the magnitudes of these inefficiencies as supplied in prior work are illustrated in the present paper a new separate variable is introduced which makes it possible to determine whether operations were conducted in regions of increasing constant or decreasing returns to scale in multiple input and multiple output situations the results are discussed and related not only to classical single output economics but also to more modern versions of economics which are identified with contestable market theories

dynamic efficiency estimation the shadow cost approach is developed in the context of the dynamic duality model of intertemporal decision making to formulate theoretical and econometric models of dynamic efficiency the dynamic efficiency model is applied to a panel of 72 u s major investor owned electric utilities using fossil fuel fired steam electric power generation over the period 1986 1999 the major results show that most electric utilities underutilized fuel relative to the aggregated labor and the maintenance input and overutilized capital in production states adopting a deregulation plan improve the performance of utilities in terms of the technical efficiency of variable inputs

a model of inventory and layoff behaviour under uncertainty this paper develops a model of firm behavior under uncertainty designed to study the interac tion of inventories and layoffs the model is a blend of a buffer sto ck model of inventory behavior and an implicit contract model of layo ffs the model creates a distinction between inventory biased and lay off biased firms each of which exhibits inherently different pattern s of response of inventories and temporary layoffs to demand shocks in addition the model implies that the inventory layoff interaction tends to strengthen weaken the response of price and the work force to changes in anticipated demand real interest rates copyright 1988 by royal economic society

dynamic data envelopment analysis modeling intertemporal behavior of a firm in the presence of productive inefficiencies abstract this study extends data envelopment analysis dea to a dynamic framework our dynamic dea not only provides a measure of dynamic productive efficiency but can also be used as a nonparametric alternative to the econometric modeling of the intertemporal behavior of a firm

empirical analysis of macroeconomic time series var and structural models abstract var and structural econometric models have complementary roles in the modelling of macroeconomic time series a constant parameter var provided it is statistically well specified constitutes a valid basis for testing hypotheses of dynamic specification exogeneity and a priori structure thus facilitating model evaluation as well as suggesting a potentially efficient model development strategy deterministic e g trends and regime shifts and stochastic e g integrated variables non stationarities are analysable within this framework and the johansen maximum likelihood procedure for cointegrated systems is used in an analysis of the determination of earnings prices productivity and unemployment in the u k

buffer stocks and labor demand further evidence this paper presents estimates of a multivariate flexible accelerator model of labor demand hours and the number of production workers which shows that stocks of finished goods unfilled orders and materials inventories have significant impacts upon labor demand univariate time series models are used to capture expectations of the determinants of desired stocks new orders real wages and real raw materials prices and these magnitudes are found to follow a random walk without drift expected new orders and errors in forecasting new orders are found to have an important impact upon labor inputs real wage forecasting errors are found to be important for hours demand

determination of employment with wage and price speculation the purpose of this paper is to investigate whether aggregate fluctuations in employment may be explained within a market clearing framework as intertemporal substitution in labor supply and demand an intertemporal substitution model for the firm is derived this model is estimated with a lucas rapping type supply equation empirical results with finnish data lend support to the intertemporal substitution model particularly concerning the demand function specification on the other hand the results for the supply equation are somewhat mixed being rather sensitive to the dynamic specification

unionism mio the cyclical behavior of the labor tv rket in u s manufacturing t he traditional view of market dynamics implies that when demand varies intertemporal variation in quantities exchanged increases as prices become less flexible this reasoning leads to the proposition that wage and price rigidities are important contributors to cyclical fluctuations in output fischer 1977a and gray 1978 based formal macro models on this principle although this view is common it has little empirical support the coexistence of union and nonunion establishments engaged in similar activities contains potential for testing its merits economists have long maintained that in the short run union wages are less flexible than nonunion wages dunlop 1950 rees 1951 this difference should produce larger fluctuations in union employment and hours empirical studies have generally supported the union wage rigidity hypothesis lewis 1963 ashenfelter johnson and pencavel 1972 and hendricks 1981 2 but until recently lack of data precluded analysis of hours and employment definitive answers to the important questions concerning unions influence on cyclical behavior require yet unavailable information matching the behavior of firms and characteristics of workers but data from modem surveys have allowed considerable progress nevertheless it remains a challenge to determine how much of differences observed in the stability of labor utilization are attributable to differences in the stability of demand medoff 1979 and raisian 1979 report that cyclical variation of employment and hours is indeed greater for union labor but despite attempts to allay suspicion that their finding arises primarily from concentration of union members in cyclically sensitive industries both studies leave room for doubt raisian estimated functions relating an individual s wage and weeks worked in a year to a proxy for excess demand that year s unemployment rate in the worker s industry the technique is attractive but raisian s data included workers from the entire economy and the industries were broad aggregates thus differences in the union and nonunion groups compositions may play a large role medoff who confined his study to production workers in manufacturing and used data allowing finer partitions investigated the importance of composition more thoroughly but he did not estimate relationships between adjustments in employment or hours and a measure of demand furthermore his focus was principally on the composition of manhours adjustments rather than their size in this paper i combine the strongest features of the medoff and raisian studies in further examination of the influence of unionism on cyclical fluctuations using current population surveys u s department of commerce 1978 from may of 1973 75 my analysis covers production workers in manufacturing during a period of rising inflation and unemployment the heart of the analysis is a measure of residual employment that quantifies by three digit industry and year shortrun excess demand for labor i construct this variable from employment time series and use it to estimate union nonunion differences in the cyclical responses of unemployment hourly wage rates and hours worked the results are consistent with the view that increasing rigidity in wages amplifies cyclical fluctuations in the utilization of labor the wage regressions add further to the literature s already strong support for the union wage rigidity hypothesis the employment status and hours regressions imply that the sensitivities of employment received for publication august 12 1981 revision accepted for publication february 11 1983 federal reserve bank of dallas this paper is based on my ph d dissertation which was completed at ucla with financial assistance from the rand corporation and the department of labor comments by referees and by participants of labor workshops at ucla and the university of chicago as well as the computation assistance of brian mckee are gratefully acknowledged i am responsible for any remaining errors the views expressed should not be attributed to the federal reserve bank of dallas or the federal reserve system one study is gordon 1982 who concludes page 41 that macroeconomic instability in the united states has been aggravated by the unusually sluggish behavior of nominal wages in the postwar era 2see also johnson 1975 parsley 1980 and moore and raisian 1980

some consequences of temporal aggregation in empirical analysis i derive the generating mechanism of a temporally aggregated process when the disaggregated one belongs to the vector autoregressive integrated moving average class i then study the effects of temporal aggregation on a set of characteristics of usual interest such as exogeneity causality cointegration and common features an empirical example with canadian interest rates illustrates the main issues

inference in cointegrating models uk m1 revisited the paper addresses the practical determination of cointegration rank this is difficult for many reasons deterministic terms play a crucial role in limiting distributions and systems may not be formulated to ensure similarity to nuisance parameters finite sample critical values may differ from asymptotic equivalents dummy variables alter critical values often greatly multiple cointegration vectors must be identified to allow inference the data may be 1 2 rather than 1 1 altering distributions and conditioning must be done with care these issues are illustrated by an empirical application of multivariate cointegration analysis to a small model of narrow money prices output and interest rates in the uk copyright 1998 by blackwell publishers ltd

dynamic efficiency measurement theory and application nonparametric dynamic measures of production efficiency are developed in the context of an adjustment cost technology and intertemporal cost minimization bounds on each efficiency measure are derived for each firm using a nonparametric revealed preference approach long run efficiency measures indicate the relative efficiency of both variable and dynamic factors while short run measures of efficiency indicate whether variable inputs are employed efficiently in the production process the efficiency measures are temporal in nature by describing the degree of efficiency of the firm at a particular point along its adjustment path the empirical implementation is illustrated for a balanced panel of pennsylvania dairy operators during 1986 1992

small system modelling of real wages inflation unemployment and output per capita in italy 1970 1994 the relationships between real wages output per capita inflation and unemployment in italy between 1970 and 1994 are modelled using a cointegrated vector autoregression there is evidence of a change in the underlying equilibria and in the dynamic evolution of the variables probably associated with the substantial changes in many sectors of the italian economy after 1979 alternative ways to model structural change in the italian labour market are considered in adopting a split sample approach the results favour an hysteresis interpretation of unemployment

the resurgence of inventory research what have we learned abstract recent empirical and theoretical research on business inventories is surveyed and critically evaluated while most inventory research has had macroeconomic motivations we focus on its microtheoretic basis and on potential conflicts between theory and evidence the paper asks two principal questions first how can inventories which are allegedly used by firms to stabilize production nonetheless be a destabilizing factor at the macroeconomic level second why if firms are following the production smoothing model is production more variable than sales in many industries we suggest that the so called s s model may help answer both questions

assessing dynamic inefficiency of the spanish construction sector pre and post financial crisis this paper undertakes the full decomposition of dynamic cost inefficiency into technical scale and allocative inefficiency based on the dynamic directional distance function the empirical application estimates dynamic inefficiency in the spanish construction industry before and during the current financial crisis over the period 2001 2009 static inefficiency measures are biased in a context of a significant economic crisis with large investments and disinvestments as they do not account for costs in the adjustment of quasi fixed factors allocative inefficiency is smaller while technical inefficiency is larger when using the dynamic compared to the static framework results further indicate that overall dynamic cost inefficiency is very high with technical inefficiency being the largest component followed by allocative and scale inefficiency moreover overall dynamic cost inefficiency is significantly larger before the beginning of the financial crisis than during the financial crisis larger firms are less technically and scale inefficient than smaller firms on average but have more problems in choosing the mix of inputs that minimizes their long term costs firms that went bankrupt on average have a higher overall dynamic cost inefficiency and scale inefficiency than continuing firms

accounting for slacks to measure dynamic inefficiency in data envelopment analysis abstract slacks that arise when nonparametrically constructing technologies are relevant because they can be an important source of technical inefficiency this paper extends the measurement of dynamic inefficiency in the full input output space in the adjustment cost theory framework to account for slacks in particular the paper develops the dynamic weighted additive model in data envelopment analysis dea and shows its main properties additionally the approach is illustrated by a real application the empirical application concerns data on large firms in the dairy manufacturing industry in the main dairy producing countries in the european union france germany italy spain poland and the czech republic from 2005 to 2012 the results show the differences in average dynamic inefficiency between the analyzed countries the findings also indicate that not surprisingly firms are on average closer to their own country frontier than the common frontier comprising all firms regardless of country greater inefficiency was also found on average in the new approach when related to the dynamic framework that does not account for slacks

dynamic labour demand using error correction model using a new econometric model this study provides evidence that contradicts previous assertions about the japanese labour market the interrelationship between employment and hours of labour is stressed in this analysis by explicitly dividing labour input into both employment and labour hours this model enables results to be obtained through both simulation and estimation which allow measurement of adjustment speeds and elasticity in both employment and labour hours to wages the results of the simulations are as follows no apparent difference in adjustment speeds between employment and hours of labour was found the adjustment of hours of labour is more cyclical and overshoots whereas that of employment is smoother the adjustment speed of each simulation is slower than that found in most previous studies in the present long run simulation it is not as slow in the short run and policy simulations therefore adjustment speeds strongly depend on the method of simulation

excess labour and the business cycle a comparative study of japan germany the united kingdom and the united states against the background of firm specific human capital theory this paper investigates empirically the relative propensity of manufacturing industries in japan germany the united kingdom and the united states to hold excess labour over the business cycle both stock and utilization dimensions of the labour input are integrated into the study throughout discussion is linked to earlier research that has analysed the relative international performance of the japanese labour market

increasing returns labour utilization and externalities procyclical productivity in the united states and japan this paper investigates procyclical productivity and attempts to discriminate among several competing explanations the study focuses on the united states and japan since the different industrial relations in these two economies serve to cast a sharper light on the procyclical productivity debate labour hoarding evaluated through the introduction of a labour utilization proxy proves to be an important influence the interpretation of the role of external economies remains an open issue

crossing the river a comparative perspective on italian employment dynamics crossing the river a comparative perspective on italian employment dynamics this paper studies the unprecedented job destruction which occurred throughout europe during the recession of the early 1990s it raises the question whether changes in the institutional structure of various countries labour markets may have deepened the normal effects of the recession institutional legal and sociopolitical safety nets were used to protect many european employees from technological and demand shocks throughout the 1970s and early 1980s important steps have since been taken to deregulate industrial relations european labour markets may currently be in the middle of the river they already experience the negative employment aspects of an american labour market without yet enjoying its benefits based on a study of several countries the article concludes that the social costs of deregulation will be smallest if the intended destination of the transition is reached credibly and without hesitation policy makers must point decisively towards a well defined riverbank rather than leaving the labour market in the middle of the stream giuseppe bertola and andrea ichino

inventories layoffs and the short run demand for labor this paper presents a theoretical and empirical analysis of the short run employment layoff and inventory strategies of firms on average more than two thirds of all layoffs in american manufacturing end in a rehire by the employer of origin martin feldstein 1975 david lilien 1980 these temporary layoffs have recently accounted for about half of all ongoing employer initiated spells of unemployment in that sector see table 1 and have led to a revised interpretation both of the involuntary nature of these separations costas azariadis 1975 feldstein 1976 martin baily 1977 and of the durability of employment relationships evidently a significant proportion of unemployed workers know that the conditions that generated their separations are temporary and so they expect to be recalled within some reasonable time the point of departure for this paper is in interpreting these findings as evidence of a privately and socially efficient stock of excess capacity held against contingent future demands that is as an inventory of a productive input this view leads to empirically refutable hypotheses regarding both the role of temporary layoffs and the circumstances under which they will be important in particular both excess capacity idle resources and inventories are devices by which firms may economize on the costs of rapid adjustments when faced with unstable market conditions george stigler 1939 in such an environment the demands for layoffs and for other buffer stocks are jointly determined elements of long run technology the choice among alternative stocks will depend on relative profitabilities and firms may choose to hold stocks of inputs as a substitute for inventory accumulation especially if the costs of varying capacity or of storage are important this reasoning implies that i the structure of short run employment and layoff decisions will vary across firms and industries and ii differences in these structures will be systematically related to the role of inventories in firms dynamic strategies some perspective is warranted at least since charles holt et al 1960 economists have recognized the production smoothing role of inventories and the necessity of predicting future demand in making current decisions david belsley 1969 gerald childs 1967 michael ward 1978 similarly one of the contributions of recent work on implicit labor contracts is in viewing the exchange of labor services as a bilateral and durable commitment both these lines of analysis are concerned with the methods firms use to respond to fluctuating demand yet the underlying interrelated nature of employment and inventory decisions has rarely been recognized roger miller 1968 m ishaq nadiri and sherwin rosen 1973 r g crawford 1979 robert hall 1972 this paper aims to provide a framework for evaluating these decisions and in so doing to explain some interesting features of observed labor markets the notion of substitution between inventories of human and physical capital suggests a more disaggregated look at the data table 2 shows the importance of temporary layoffs in the distribution of unemployment among manufacturing industries it reports layoff and total unemployment rates for twelve representative industries over the period 197376 and average layoff rates and recall frequencies for 1958 76 among all 21 twodigit manufacturing industries the correlation between layoff and rehire rates is 6 and the table illustrates this evidently industries with larger than normal layoff rates also tend to have larger rehire frequencies from firm initiated spells of unemployment this university of chicago i am indebted to gary becker robert cotterman sherwin rosen jose scheinkman michael ward finis welch the managing editor and an anonymous referee for discussions and comments at various stages the usual disclaimer applies

some international evidence on inventory fluctuations abstract this paper shows some international evidence that production is more variable than sales in most developed countries but the reverse is true in most developing countries from international perspectives cost shocks do not appear to be the predominant source of fluctuations in inventories contrary to the widely accepted evidence in the postwar united states demand shocks and serial correlations in demand on the other hand appear to be of roughly equal importance for inventory fluctuations

measuring technical efficiency in the presence of pesticide spillovers and production uncertainty the case of dutch arable farms pesticides dynamic effects and production uncertainty play an important role in farmers production decisions pesticides have a current production impact through reducing crop damage in the current period and a future impact through impacting the farm biodiversity which alters the future production environment this study presents the difference in inefficiency arising from models that ignore the dynamic effects of pesticides in production decisions and the impact of production uncertainty a dynamic data envelopment analysis dea model is applied to outputs inputs and undesirables of dutch arable farms over the period 2003 2007 a bootstrap approach is used to explain farmers performance providing empirical representations of the impact of stochastic elements on production these empirical representations are used to adjust firms inefficiency scores to incorporate production uncertainty in efficiency evaluation we find that efficiency increased dramatically when a production technology representation that considers both pesticides dynamic impacts and production uncertainty is adopted

equilibrium adjustment with endogenous information and inventories the paper analyzes the interaction of information acquisition and inventory flexibility with industry adjustment to imperfectly perceived cost and demand disturbances improved information about disturbances reduces the extent to which disturbances are unperceived and dampens the use of inventories reduced inventory flexibility induces firms to devote more resources to acquiring information about disturbances the analysis demonstrates how equilibrium price and output adjustment depend endogenously on the degree of inventory flexibility and other structural parameters influencing the acquisition of information in this paper we analyze how endogenous information acquisition and inventory flexibility influence price and output adjustment in a competitive industry we focus on the potential substitutability of information acquisition for inventory flexibility when disturbances are imperfectly perceived by individual firms the analysis highlights the general issue of how market adjustment depends on structural parameters that influence agents incentives to acquire information there are several reasons why information acquisition may play a role in market adjustment first the rapid development of information technology has enabled firms to gather and process data relevant to production and sales decisions from a greater number of external and internal sources this trend has reduced the costs of forecasting and monitoring factors influencing production and demand conditions for the individual firm relative to those of its competitors as well as for the industry as a whole in particular it has permitted quicker awareness of changing customer demand as well as greater control of the flow of inputs and intermediate goods during the production process this implies that the resources devoted to information acquisition and processing have come to play an important role in firm decisions 2 second improved information about demand and cost conditions may affect the function of inventories inventory adjustment allows a firm s production costs to be smoothed in response to anticipated movements in demand and costs and to be buffered against unanticipated disturbances see ashley and orr 1985 thus

on recalls layoffs variable hours and labor adjustment costs abstract the paper analyzes the employment policy of a firm that can vary both hours and the level of employment the analysis differs from previous work in the adjustment cost literature in that the firm is able to change its employment not only through hires layoffs and quits but also by recalls of employees who were previously laid off thus we introduce the possibility of the firm inventorying the labor input it is shown that this labor inventory potential is necessary if the firm is to ever lay off workers further it is demonstrated that linear rather than strictly convex adjustment costs are then required if the firm is to always recall employees who were previously laid off prior to hiring new workers

the response of prices sales and output to temporary changes in demand we determine empirically how the big three automakers accommodate shocks to demand they have the capability to change prices alter labor inputs through temporary layoffs and overtime or adjust inventories these adjustments are interrelated non convex and dynamic in nature combining weekly plant level data on production schedules and output with monthly data on sales and transaction prices we estimate a dynamic profit maximization model of the firm using impulse response functions we demonstrate that when an automaker is hit with a demand shock sales respond immediately prices respond gradually and production responds only after a delay the size of the immediate sales response is linear in the size of the shock but the delayed production response is non convex in the size of the shock for sufficiently large shocks the cumulative production response over the product cycle is an order of magnitude larger than the cumulative price response we examine two recent demand shocks the ford explorer firestone tire recall of 2000 and the september 11 2001 terrorist attacks

inventories rational expectations and economic activities abstract this paper examines the role of inventories when adjustments in output involve fixed employment costs such as hiring and training costs these costs force the firm to use inventories to stabilize output fluctuations contrary to the blinder fisher model unanticipated aggregate disturbances in the present model may have no subsequent impacts on the economy the exchange between mccallum and blinder frydman are also discussed in this context