The Effect of Labour Turnover Costs on Average Labour Demand When Recessions Are More Persistent than Booms

  1. Arjona-Béjar, Luis E. 1
  2. Díaz-Vázquez, Pilar 1
  1. 1 Departamento de Fundamentos del Análisis Económico, Facultad de Ciencias Económicas y Empresariales, Universidad de Santiago de Compostela, Avenida do Burgo S/N, A Coruña, 15784 Santiago de Compostela, Spain
Journal:
ISRN Economics

ISSN: 2090-8938

Year of publication: 2013

Volume: 2013

Pages: 1-13

Type: Article

DOI: 10.1155/2013/138182 GOOGLE SCHOLAR

More publications in: ISRN Economics

Abstract

This paper examines how labour turnover costs affect average labour demand when troughs are more persistent than booms. We show that the effect of firing costs on average labour demand is more expansionary (or less contractionary): the greater is the difference between the persistence of troughs and the persistence of booms, and the more prolonged are the macroeconomic shocks. This analysis may shed some light on the expected effect of a reduction of firing costs when an economy is suffering more prolonged recessions (relative to booms): average labour demand will be lower.

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