Firing Costs, Employment Fluctuations and Average Employment: An Examination of Germany

Jennifer Hunt

Economica, 2000, vol. 67, issue 266, 177-202

Abstract: West Germany's Employment Promotion Act of 1985 facilitated the use of fixed‐term contracts and increased the number of dismissals above which the employer is required to establish a ‘social plan’ (involving severance payments). I assess the effect of this reduction in ‘firing costs’ on movements in employment, using monthly data on a panel of detailed manufacturing industries for 1977‐92. I also examine the effect of introducing flexible hours of work in certain industries beginning in 1985. I find that employment adjustment was unaffected by the lower firing costs, but slowed by the greater working hours flexibility.

Date: 2000
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https://doi.org/10.1111/1468-0335.00203

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Working Paper: Firing Costs, Employment Fluctuations and Average Employment: An Examination of Germany (1994)
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