Labour Demand in Germany: An Assessment of Non-Wage Labour Costs

Yu-Fu Chen and Michael Funke

No 952, CESifo Working Paper Series from CESifo

Abstract: The data indicate that non-wage labour costs in Germany have reached a record high in recent years. From 1972 to 2001, the ratio of non-wage labour costs to direct compensation in West German manufacturing industry rose from 55.6 per cent to 81.2 per cent. The topic of non-wage labour costs is increasingly being discussed among and between the political parties because non-wage labour costs are likely to have major negative effects on employment. We follow the real options approach, which allows us to investigate the value to a firm of waiting to adjust labour when the firm´s revenues are stochastic and adjustment costs are sunk. Simulation exercises show that the interaction between hiring and firing costs, non-wage labour costs and uncertainty can have important ramifications for employment dynamics.

Keywords: real options; labour demand; non-wage labour costs; hiring and firing costs; Germany (search for similar items in EconPapers)
Date: 2003
New Economics Papers: this item is included in nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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Working Paper: Labour Demand in Germany: An Assessment of Non- Wage Labour Costs (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_952

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