Non-Wage Labour Costs, Policy Uncertainty and Labour Demand - a Theoretical Assessment

Yu-Fu Chen and Michael Funke

Quantitative Macroeconomics Working Papers from Hamburg University, Department of Economics

Abstract: Labour costs in various European countries have reached a record high in recent years. The topic of non-wage labour costs is therefore 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 wage and non-wage costs 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: product Market Competition; Regulation; Real Options; Investment; Empolyment (search for similar items in EconPapers)
Date: 2005-11
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Citations: View citations in EconPapers (19)

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Journal Article: NON‐WAGE LABOUR COSTS, POLICY UNCERTAINTY AND LABOUR DEMAND – A THEORETICAL ASSESSMENT (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:ham:qmwops:20511

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