Firing costs and labor market tightness: Is there any relationship?
AbstractEmpirical evidence suggests the existence of a negative relationship between rigidities on the labor market and the level of economic activity. In this paper, we provide a background of this evidence. We build a model where the employed worker chooses the optimal level of firing costs by maximizing her human capital. Performing a comparative statics exercise, we analyze the effects of labor market tightness on the optimal choice of firing costs. Our theoretical model shows the existence of an inverse relation between labor market conditions and the level of firing cost under plausible hypothesis.
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Bibliographic InfoArticle provided by Elsevier in its journal Research in Economics.
Volume (Year): 65 (2011)
Issue (Month): 1 (March)
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Web page: http://www.elsevier.com/locate/inca/622941
Matching models Firing costs;
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