DP601 Labour Turnover Costs and Average Labour Demand

Author(s): Giuseppe Bertola
Publication Date: December 1991
Keyword(s): Job Security, Labour Contracts, Turnover Costs
JEL(s): J23, J63
Programme Areas: Human Resources
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=601

The effect of labour turnover costs on average employment in a partial equilibrium model of labour demand, depends on the form of the revenue function, on the rates of discount and labour attrition, and on the relative size of hiring and firing costs. If discount and attrition rates are strictly positive, firing costs may well increase average employment even when hiring costs reduce it.