Journal Article

On-the-Job Learning, Firing Costs, and Employment


  • Diaz-Vazquez
  • P.
  • Snower
  • D.J.

This paper explores the influence of on-the-job learning on the employment effect of firing costs. In the absence of on-the-job learning, the theoretical literature shows that firing costs may increase average employment (over the booms and recessions of the business cycle). We show that the existence of on-the-job learning weakens this effect. In fact, when the amount of on-the-job learning is sufficiently large, a rise in firing costs tends to reduce average employment.

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