Journal Article

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

Authors

  • Pilar Diaz-Vazquez
  • Dennis J. Snower
Publication Date

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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Info

JEL Classification
E24

Key Words

  • Average employment
  • Firing Costs
  • Insider wage
  • On-the-job learning
  • Severance Payments