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Abstract

Do institutional firing costs slow the diffusion of information and communications technology (ICT)? The paper develops a model in which, as the technology at a given plant drops behind the best practice, it optimally reduces its workforce. As a result, firing costs are particularly detrimental to profits in industries in which the rate of technical change is rapid - such as ICT - and countries with high firing costs specialize in industries in which technical change is sluggish. The paper suggests that industry composition is a new channel through which labor market regulation might impact macroeconomic aggregates. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/j.red.2005.10.002
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Bibliographic Info

Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 9 (2006)
Issue (Month): 2 (April)
Pages: 224-241

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Handle: RePEc:red:issued:v:9:y:2006:i:2:p:224-241

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Related research

Keywords: Employment protection; Firing costs; Rate of technical change; Information and communications technology; Industry composition;

Find related papers by JEL classification:

• J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Private Pensions
• J65 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment Insurance; Severance Pay; Plant Closings
• L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
• L63 - Industrial Organization - - Industry Studies: Manufacturing - - - Microelectronics; Computers; Communications Equipment
• O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
• O38 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Government Policy

References

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14. Holzmann, Robert & Pouget, Yann & Vodopivec, Milan & Weber, Michael, 2011. "Severance pay programs around the world : history, rationale, status, and reforms," Social Protection Discussion Papers 62726, The World Bank.
    
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