Date: 2007
Type: Working Paper
Labor Adjustment: Disentangling Firing and Mobility Costs
Working Paper, EUI ECO, 2007/44
GUISO, Luigi, SAPIENZA, Paola, ZINGALES, Luigi, Labor Adjustment: Disentangling Firing and Mobility Costs, EUI ECO, 2007/44 - https://hdl.handle.net/1814/7498
Retrieved from Cadmus, EUI Research Repository
This paper studies the costs of adjusting employment, distinguishing between firms’
firing and workers’ mobility costs. We construct a simple dynamic general equilibrium
model of labor demand and supply and show that only the joint response of employment
and wages to firm level shocks can discriminate between the two types of costs. We use
matched employer-employees data for Italy to estimate the model and find that both
types of costs are present, that they are sizeable (in the range of 19,000 euros in total)
and that firing costs account for almost 90 percent of total adjustment costs.
Cadmus permanent link: https://hdl.handle.net/1814/7498
ISSN: 1725-6704
Series/Number: EUI ECO; 2007/44
Publisher: European University Institute