Quitting Externalities, Employment Cyclicality and Firing Costs
This paper derives a model in which workers have firm-specific and industry-specific skills, and in each period there is a non-zero probability that a worker quits. This makes the private discount factor, used by firms in making decisions about hiring and training new workers and firing existing ones, higher than the social one. As a consequence, not only do firms underinvest in training but employment becomes too cyclical. Firms are too quick to dispose of their human capital in a cyclical downturn because it is of less value to them than it is to society. This provides a rationale for state-mandated redundancy payments as a second-best remedy to overcome the market failure.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
|Date of creation:||Dec 1994|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:1101. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()The email address of this maintainer does not seem to be valid anymore. Please ask to update the entry or send us the correct address
If references are entirely missing, you can add them using this form.