Employment, Macroeconomic Fluctuations and Job Security

María del Pilar Díaz-Vázquez and Dennis Snower

No 1430, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The paper explores the influence of job security provisions on employment and unemployment. We show that this influence depends on the persistence of the macroeconomic fluctuations to which the labour market is exposed, and on employees’ bargaining power in wage negotiations. Specifically, costs of firing and hiring reduce employment and stimulate unemployment when the macroeconomic fluctuations are sufficiently prolonged and employees have sufficient bargaining power; but firing and hiring costs can have the opposite effect if the fluctuations are transient and employees are weak. In this way, the paper offers an explanation for Europe’s favourable unemployment performance vis-à-vis the United States in the 1950s and 1960s (when macroeconomic fluctuations were transient and union strength was moderate), and Europe’s relatively unfavourable unemployment performance since the mid-1970s (when fluctuations were prolonged and unions were stronger).

Keywords: Employment; Firing and Hiring Costs; Job Security; Macroeconomic Fluctuations; Unemployment; Wage Determination (search for similar items in EconPapers)
JEL-codes: D8 E3 J2 J3 J6 (search for similar items in EconPapers)
Date: 1996-07
References: Add references at CitEc
Citations: View citations in EconPapers (17)

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=1430 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:1430

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... ers/dp.php?dpno=1430

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().