Strong Hysteresis due to Age Effects

Yu-Fu Chen and Gylfi Zoega

No 2010-09, SIRE Discussion Papers from Scottish Institute for Research in Economics (SIRE)

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)
Date: 2010
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