DP690 A Model of Labour Demand with Linear Adjustment Costs
|Author(s):||Samuel Bentolila, Gilles Saint-Paul|
|Publication Date:||August 1992|
|Keyword(s):||Firing Costs, Labour Demand, Unemployment|
|Programme Areas:||International Macroeconomics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=690|
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.