In this paper, we analyze employment and capital adjustments using a panel of plants from Colombia. We allow for nonlinear adjustment of employment to reflect not only adjustment costs of labor but also adjustment costs of capital, and vice-versa. Using data from the Annual Manufacturing Survey,...

We use a panel of manufacturing plants from Colombia to analyze how the rise in payroll tax rates over the 1980’s and 1990’s affected the labor market. Our estimates indicate that formal wages fall by between 1.4% and 2.3% as a result of a 10% rise in payroll taxes. This...

Labor market regulations have often been blamed for high and persistent unemployment in Europe, but evidence on their impact remains mixed. This paper analyzes how labor and product market regulations interact to affect turnover and unemployment. We present a matching model which illustrates how...