A bstratAcross industry and country comparisons have found the speed of adjustment in short-run employment functions to be positively related to the rate of unemployment. The present paper develops a time-series model in which the reaction coefficient varies with unemployment, and estimates it for the manufacturing sectors of the eight OECD countries for which suitable data are available. The new model is non-linear and is estimated using full information maximum-likelihood procedures. Application of the log-likelihood ratio test finds that the new vanable reaction coefficient model is superior to the fixed reaction coefficient model for the United States, Canada, Australia, Austria, Ireland and the United Kingdom.

David J. Smyth, Real Wages, Business Cycles and the Speed of Adjustment of Employment in Manufacturing Sectors of Industrialized Countries, The Review of Economics and Statistics, Vol. 63, No. 2 (May, 1981), pp. 311-312

David J. Smyth, Stephen H. Karlson, The Effect of Fringe Benefits on Employment Fluctuations in U.S. Automobile Manufacturing, The Review of Economics and Statistics, Vol. 73, No. 1 (Feb., 1991), pp. 40-49

David J. Smyth, William J. Boyes, Dennis E. Peseau, The Measurement of Firm Size: Theory and Evidence for the United States and the United Kingdom, The Review of Economics and Statistics, Vol. 57, No. 1 (Feb., 1975), pp. 111-114