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Big shock, slow growth and the dynamics of aggregate labour demand with firing costs

Author

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  • Marianne CHAMBIN

    (Mad-Paris I)

  • Franck PORTIER

    (CEPREMAP-MAD University of Rouen)

Abstract

This paper studies the dynamic properties of the labour demand model with non-convex adjustment costs proposed by Bentolila and Bertola [1990]. With this model we evaluate the importance of the firing costs, following a great shock, for the dynamics of adjustment of the aggregated labour demand of a stationary state to an other. The model is calibrated on the French economy, and studies the transition following the shock of 1973-74,-i.e. a shock on the price of oil as well as the transition from a rapid and stable growth to a slow and uncertain one. We show that in this case, a drastic reduction of the firing costs when the shock occurs does not allow to modify substantially the path of the economy.

Suggested Citation

  • Marianne CHAMBIN & Franck PORTIER, 1996. "Big shock, slow growth and the dynamics of aggregate labour demand with firing costs," Discussion Papers (REL - Recherches Economiques de Louvain) 1996041, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    • Handle: RePEc:ctl:louvre:1996041
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    File URL: http://www.jstor.org/stable/40724132
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    More about this item

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications

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