We analyze nonlinear adjustments of capital and labor using plant data from the Colombian Annual Manufacturing Survey, allowing for interdependence in adjustments of the two factors. We find nonlinear employment and capital adjustments. We also find that capital shortages reduce hiring, and labor surpluses reduce capital shedding. Moreover, we find that job destruction and capital formation increased after factor market deregulation in Colombia.
Factor Adjustment After Deregulation: Panel Evidence from Colombia PlantsMarcela Eslava, John C. Haltiwanger, Adriana Kugler, and Maurice Kugler ,
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Review of Economics and Statistics