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On the Welfare Implications of Firing Costs

Booth, Alison; Zoega, Gylfi

Description

This is a paper on the theory of institutions. It provides a rationale for the presence of firing costs in OECD countries based on a market failure that takes the form of an externality. Workers have firm-specific and industry-specific skills, and in each period there is a nonzero probability that a worker quits. The quitting probability makes the private discount rate (used by firms in making decisions about firing workers) higher than the social discount rate. This generates a "quitting...[Show more]

CollectionsANU Research Publications
Date published: 2003
Type: Journal article
URI: http://hdl.handle.net/1885/77068
Source: European Journal of Political Economy
DOI: 10.1016/S0176-2680(03)00034-X

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