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Adjustment costs and factor demand: new evidence from firms' real estate

Bergeaud, Antonin and Ray, Simon (2021) Adjustment costs and factor demand: new evidence from firms' real estate. Economic Journal, 131 (633). 70 - 100. ISSN 0013-0133

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Identification Number: 10.1093/ej/ueaa094

Abstract

We study corporate real estate frictions and their effect on firm dynamics and labour demand. We build and simulate a general equilibrium model with heterogeneous firms that predicts the response of firms to a productivity shock in the presence of fixed adjustment costs on real estate. Using a large firm-level database merged with local real estate prices, we then exploit variations in the tax on capital gains to document a causal effect of adjustment costs on firms' labour demand and derive new results on the causes and implications of firms' local relocation.

Item Type: Article
Official URL: https://academic.oup.com/ej
Additional Information: © 2021 Royal Economic Society
Divisions: Centre for Economic Performance
Subjects: H Social Sciences > HG Finance
H Social Sciences > HD Industries. Land use. Labor
JEL classification: D - Microeconomics > D2 - Production and Organizations > D21 - Firm Behavior
H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H25 - Business Taxes and Subsidies
J - Labor and Demographic Economics > J2 - Time Allocation, Work Behavior, and Employment Determination and Creation; Human Capital; Retirement > J21 - Labor Force and Employment, Size, and Structure
O - Economic Development, Technological Change, and Growth > O5 - Economywide Country Studies > O52 - Europe
Date Deposited: 25 Mar 2022 15:39
Last Modified: 31 Mar 2022 12:39
URI: http://eprints.lse.ac.uk/id/eprint/114481

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