Differing factor adjustment costs across industries: Evidence from Japan

In this Paper, we use industry data from Japan to examine the joint behavior of investment and hiring. We estimate factor adjustment costs in industries and focus on the industrial difference in such costs. Our analisis reveals that heavy industries such as steel and transport equipment need relatively large adjustment costs. A comparison between the U.S and Japan reveals thet the ratio of labor adjustment costs in total adjustment costs tends to be higher in Japan. Our findings are useful in considering the mechanism of factor adjustment costs.