Strong Hysteresis due to Age Effects

Yu-Fu Chen and Gylfi Zoega

No 230, Dundee Discussion Papers in Economics from Economic Studies, University of Dundee

Abstract: Strong hysteresis in the labour market (see Cross, 1995) requires workers to be heterogeneous in terms of the cost of hiring and firing. We show how such heterogeneity arises naturally in labour markets due to differences in workers’ age by showing that both the hiring and the firing thresholds for productivity are age dependent. The presence of strong hysteresis does not for this reason depend on ad-hoc differences in the cost of hiring and firing workers.

Keywords: Hysteresis; hiring and firing costs; heterogeneous workers (search for similar items in EconPapers)
JEL-codes: E24 J41 J64 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2010-02
New Economics Papers: this item is included in nep-age and nep-mac
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Working Paper: Strong Hysteresis due to Age Effects (2010)
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