Worker-level adjustment costs in a developing country: evidence from Mexico

Available from: 
October 2013
Paper author(s): 
Daniel Lederman (World Bank)
David Kaplan (IDB)
Raymond Robertson (Macalester College)

Labor market adjustment costs play a significant role in many models and have recently arisen as a key component in papers that analyze the effect of international integration on labor markets. Few previous papers have explicitly recognized the difference between labor market adjustment costs on the demand (firms) and supply (workers) sides of the market. This paper estimates supply-side labor market adjustment costs using Mexican administrative data. This paper explores the role of aggregation, which has significant effects on cost estimates and compares estimates with previous estimates. These comparisons suggest that supply-side costs are much higher than demand-side costs in Mexico and that Mexican supply-side costs may be much higher than U.S. supply-side costs.


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Research section: 
Lacea 2013 annual meeting
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