Working Paper

On the Introduction of Firing Costs

Kiel Working Papers, 1559

This paper provides a survey of the recent literature about firing costs and discusses the transmission channels of firing costs in a partial equilibrium context. In addition, we expand our analysis two types of firing costs in a New Keynesian model with purely endogenous separations. We further distinguish between the effects resulting from respecting and non-respecting the bonding critique. We find that the two types of firing costs do not show significant differences. However, respecting the bonding critique enhances the overall performance of the model.


Steffen Ahrens
Dennis Wesselbaum


Publication Date
JEL Classification
E24, E32, J64