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Labor Turnover Costs and Average Labor Demand

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  • Giuseppe Bertola

Abstract

This paper studies simple partial equilibrium models of dynamic labor demand, under certainty. Labor turnover costs may or may not decrease the firm's average labor demand, depending on the form of the revenue function, on the rates of discount and of labor attrition, and on the relative size of hiring and firing costs. With strictly positive discount and labor attrition rates, the firm's optimal policy is partially myopic, and firing costs may well increase average employment even when hiring costs reduce it.

Suggested Citation

  • Giuseppe Bertola, 1991. "Labor Turnover Costs and Average Labor Demand," NBER Working Papers 3866, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:3866
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    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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