Labor cost stickiness in Finnish firms

Abstract

Existing cost accounting research has found evidence of asymmetric cost behavior related to activity level changes. This thesis studies labor cost stickiness in Finnish privately owned enterprises. The purpose is to find whether labor cost stickiness occurs in Finnish firms and whether the industry defines the magnitude of cost stickiness. By using ordinary least squares (OLS) regression and econometric model developed by Anderson, Banker, and Janakiraman (2003), contrary to existing research, no significant evidence of labor cost stickiness is found in Finnish firms other than in merchandising sub-industry retail trade. Evidence of anti-sticky cost behavior is found in manufacturing and financial industries. Additionally, there is found evidence that anti-sticky cost behavior is stronger in the manufacturing industry compared to other industries. The findings shed light on labor cost behavior in Finnish firms supplementing existing cost stickiness literature, and provide firsthand scientific evidence about cost stickiness for firms’ cost management purposes in Finland. However, the generalization of the findings beyond the years 2020–2022 can be considered weak due to the possible effect of the Covid-19 pandemic on the results. Hence, there is a need for more research on this topic with more relevant data.