Firing Costs: Eurosclerosis or Eurosuccesses?

Arbeitspapier

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 occured.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: HWWA Discussion Paper ; No. 78

Classification and Topics

• Classification: Wirtschaft ; Business Fluctuations; Cycles ; Human Capital; Skills; Occupational Choice; Labor Productivity ; Producer Cooperatives; Labor Managed Firms; Employee Ownership ; Labor Demand
• Subject: stochastic demand ; hiring and firing ; real options ; firing restrictions ; Kündigungsschutz ; Arbeitsnachfrage ; Kosten ; Konjunktur ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Chen, Yu-Fu ; Snower, Dennis J. ; Gylfi, Zoega
• Event: Veröffentlichung
• (who): Hamburg Institute of International Economics (HWWA)
• (where): Hamburg
• (when): 1999

Further information

• Handle: http://hdl.handle.net/10419/2309
• Last update: 10.03.2025, 11:45 AM CET