Empirical evidence suggests the existence of a negative relationship between rigidities on the labor market and the level of economic activity. In this paper, we provide a background of this evidence. We build a model where the employed worker chooses the optimal level of firing costs by maximizing her human capital. Performing a comparative statics exercise, we analyze the effects of labor market tightness on the optimal choice of firing costs. Our theoretical model shows the existence of an inverse relation between labor market conditions and the level of firing cost under plausible hypothesis. © 2010 University of Venice.
Firing costs and labor market tightness: Is there any relationship? / Saltari, Enrico; Tilli, Riccardo. - In: RESEARCH IN ECONOMICS. - ISSN 1090-9443. - 65:1(2011), pp. 1-4. [10.1016/j.rie.2010.02.002]
Firing costs and labor market tightness: Is there any relationship?
SALTARI, ENRICO;TILLI, Riccardo
2011
Abstract
Empirical evidence suggests the existence of a negative relationship between rigidities on the labor market and the level of economic activity. In this paper, we provide a background of this evidence. We build a model where the employed worker chooses the optimal level of firing costs by maximizing her human capital. Performing a comparative statics exercise, we analyze the effects of labor market tightness on the optimal choice of firing costs. Our theoretical model shows the existence of an inverse relation between labor market conditions and the level of firing cost under plausible hypothesis. © 2010 University of Venice.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
