Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/33425 
Year of Publication: 
2006
Series/Report no.: 
IZA Discussion Papers No. 1960
Publisher: 
Institute for the Study of Labor (IZA), Bonn
Abstract: 
This paper analyzes the effect of labor and product market regulation in a dynamic stochastic equilibrium with search frictions. Modeling multiple-worker firms allows us to distinguish between the exit-and-entry (extensive) margin, and the hiring-and-firing (intensive) margin. We characterize analytically how both margins depend on regulation before we calibrate the model to the US economy. We find that firing costs matter most for the intensive margin. Fixed or set-up costs in the product market instead alter primarily the behavior of firms at the extensive margin. Moreover, we find important interactions between the policies through firm selection. Finally, the opposite effect of product and labor market regulation on job turnover rationalizes the empirically observed similarity of turnover rates across countries.
Subjects: 
firing cost
product market regulation
firm selection
firm turnover
job turnover
JEL: 
E24
J63
J64
J65
Document Type: 
Working Paper

Files in This Item:
File
Size
299.86 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.