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Hiring and Firing: A Tale of Two Thresholds

Booth, Alison; Chen, Yu-Fu; Zoega, Gylfi


The negative effect of quits on the willingness of firms to provide on-the-job training is well documented in the theoretical literature. Here we explore the strength of this effect by solving a firm's dynamic optimization problem where there is uncertainty about future productivity and nonzero firing costs. We find that the degree to which quit rates affect hiring depends on the ratio of firing to hiring costs. As this ratio rises, the negative effect of quits becomes less important,...[Show more]

CollectionsANU Research Publications
Date published: 2002
Type: Journal article
Source: Journal of Labor Economics
DOI: 10.1086/338217


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