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Title: A Model of Labour Demand with Linear Adjustment Costs

Author(s): Samuel Bentolila and Gilles Saint-Paul

Publication Date: August 1992

Keyword(s): Firing Costs, Labour Demand and Unemployment

Programme Area(s): International Macroeconomics

Abstract: This paper formulates a discrete-time model to study the effects of firing costs on labour demand by a firm facing linear adjustment costs under serially independent productivity shocks. We show that a rise in firing costs reduces the firm's marginal propensities to hire and fire, and may increase or decrease its average steady-state labour demand.

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Bibliographic Reference

Bentolila, S and Saint-Paul, G. 1992. 'A Model of Labour Demand with Linear Adjustment Costs'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=690