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The Shape of Hiring and Separation Costs

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  • Francis Kramarz

    (Crest)

  • Marie-Laure Michaud

    (Crest)

Abstract

In this article, we estimate the structure of costs of hiring, terminating, and retiring employees in France using a representative sample of French establishments. The estimates are estimated using a panel data set for two years (1992 and 1996) that matches two sources: the Wage Structure Survey (Enquête sur la Structure des Salaires) and the Workforce Questionnaire (Déclarations des Mouvements de Main-d'Oeuvre). We show that separation costs are significantly larger than hiring costs. The cost of hiring into Permanent Contracts is larger than the cost of hiring into Fixed Term Contracts and collective termination (dismissal of at least ten workers during a 30 days period) are much more expensive than individual terminations. Hiring and separations are similar in one aspect: they entail no firm-specific fixed cost. Furthermore, the termination and hiring costs are concave, and induce firms to group their hirings (into Permanent Contracts) and separations. Retirement costs are linear. Finally, legislation appears to be a major component of these costs.
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  • Francis Kramarz & Marie-Laure Michaud, 2002. "The Shape of Hiring and Separation Costs," Working Papers 2002-38, Center for Research in Economics and Statistics.
    • Handle: RePEc:crs:wpaper:2002-38
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    More about this item

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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