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Firing Costs and Labor Market Fluctuations: A Cross-Country Analysis

Listed author(s):
  • Gonzalo Llosa

    (University of California Los Angeles)

  • Lee Ohanian

    (University of California Los Angeles)

  • Andrea Raffo

    (Federal Reserve Board)

  • Richard Rogerson

    (Princeton University)

We document large differences across OECD countries in fluctuations of the intensive and extensive margin of labor supply over the business cycle. Countries with larger fluctuations in employment relative to hours per worker tend to display larger fluctuations in total hours worked. These facts appear to be related to policies that impede the dismissal of workers. We then present a quantitative framework that features both margins of labor supply as well as costs to the adjustment of employment. Cross-country differences in dismissal costs can account for a large fraction of the patterns observed in the data.

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File URL: https://economicdynamics.org/meetpapers/2014/paper_533.pdf
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Paper provided by Society for Economic Dynamics in its series 2014 Meeting Papers with number 533.

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Date of creation: 2014
Handle: RePEc:red:sed014:533
Contact details of provider: Postal:
Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

Web page: http://www.EconomicDynamics.org/
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