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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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 Download reference. The following formats are available: HTML
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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 - - - Technological Change: Choices and Consequences; Diffusion Processes O38 - Economic Development, Technological Change, and Growth - - Technological Change - - - Government Policy
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