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Firing Costs, Misallocation, and Aggregate Productivity

José-María Da-Rocha, Marina Mendes Tavares and Diego Restuccia ()
Authors registered in the RePEc Author Service: José María Da Rocha ()

No 23008, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We assess the quantitative impact of firing costs on aggregate total factor productivity (TFP) in a dynamic general-equilibrium framework where the distribution of establishment-level productivity is not invariant to the policy. Firing costs not only generate static factor misallocation, but also a worsening of the productivity distribution contributing to large aggregate TFP losses. Firing costs equivalent to 5 year's wages imply a drop in TFP of more than 20 percent. Factor misallocation accounts for 20 percent of the productivity loss, a relatively small drop in TFP, whereas the remaining 80 percent arises from the endogenous change in the productivity distribution.

JEL-codes: E1 E6 O1 O4 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-eff and nep-mac
Date: 2016-12
Note: EFG
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Working Paper: Firing Costs, Misallocation, and Aggregate Productivity (2016) Downloads
Working Paper: Firing Costs, Misallocation, and Aggregate Productivity (2016) Downloads
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