Employment Adjustment in UK Manufacturing.

This analysis differs from previous studies of labor demand in its explicit inclusion of the costs to the firm of adju sting its workforce. These costs include institutional factors such a s employment protection legislation and unions, and market factors su ch as the degree of slack in the labor market. Two questions are addr essed: what is the quantitative impact of these forces and does their inclusion improve the fit of a labor-demand function. The results sh owed these factors to have a strong influence on the rate of hiring/f iring and to improve significantly on conventional labor-demand funct ions. Copyright 1988 by Royal Economic Society.