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| Title: | | Firing costs : eurosclerosis or eurosuccesses?  |
| Authors: | | Chen, Yu-Fu Snower, Dennis J. Gylfi, Zoega |
| Issue Date: | | 1999 |
| Series/Report no.: | | Dundee discussion papers in economics / University of Dundee 94 |
| Abstract: | | In this paper we analyse the employment implications of firing restrictions. We find that when a recession is expected and the trend rate of productivity growth is small, a rise in firing costs affects mainly the hiring decision. Thus there is a negative effect on average employment. When, on the other hand, a boom is expected and the rate of productivity growth is large, firing costs affect mainly the firing decision. Then, as a result, average employment is increased. Our analysis suggests that while firing restrictions might have stimulated employment and reduced unemployment in Europe in the first two decades following World War II - when large supply shocks were absent and the average rate of growth was high - these same restrictions may have had the opposite effects in the 1970s and 1980s, when significant negative supply shocks occurred. |
| Subjects: | | firing restrictions stochastic demand hiring and firing real options |
| JEL: | | E32 J23 J24 J54 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Publikationen von Forscherinnen und Forschern des IfW Economists Online
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