How Do Lay--off Costs Affect Employment?

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How Do Lay--off Costs Affect Employment?

Author Info

Lars Ljungqvist (Stockholm School of Economics and CEPR)

Abstract

General equilibrium analyses of lay--off costs have had mixed messages on the implications for employment. This paper brings out the economic forces at work and sheds light on the disparate results. We explain why lay--off costs tend to increase employment in search models while the opposite is true in models with employment lotteries. In matching models, we show that the employment effects depend critically on how lay--off costs are assumed to enter the bargaining process. Copyright Royal Economic Society 2002

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Publisher Info
Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 112 (2002)
Issue (Month): 482 (October)
Pages: 829-853
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Handle: RePEc:ecj:econjl:v:112:y:2002:i:482:p:829-853

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- Alonso-Borrego, César & Fernández-Villaverde, Jesús & Galdon-Sanchez, José E., 2004. "Evaluating Labor Market Reforms: A General Equilibrium Approach," IZA Discussion Papers 1129, Institute for the Study of Labor (IZA). [Downloadable!]
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- Cesar Alonso-Borrego & Jesus Fernandez-Villaverde & Jose Galdon-Sanchez, 2004. "Evaluating Labor Market Reforms: A General Equilibrium Approach," Working Papers 866, Princeton University, Department of Economics, Industrial Relations Section.. [Downloadable!]
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Andreas Hornstein & Per Krusell & Giovanni L. Violante, 2006. "Technology-policy interaction in frictional labor markets," Working Paper 06-10, Federal Reserve Bank of Richmond. [Downloadable!]
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George Alessandria & Alain Delacroix, 2007. "Trade and the (Dis)Incentive to Reform Labor Markets: The Case of Reform in the European Union," Cahiers de recherche 0738, CIRPEE. [Downloadable!]
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Tito Boeri & Michael C. Burda, 2008. "Preferences for Collective versus Individualised Wage Setting," SFB 649 Discussion Papers SFB649DP2008-021, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany. [Downloadable!]
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Ljungqvist, Lars & Sargent, Thomas J, 2005. "Jobs and Unemployment in Macroeconomic Theory: A Turbulence Laboratory," CEPR Discussion Papers 5340, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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Bauer, Thomas K. & Bender, Stefan & Bonin, Holger, 2004. "Dismissal Protection and Worker Flows in Small Establishments," IZA Discussion Papers 1105, Institute for the Study of Labor (IZA). [Downloadable!]
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