Layoffs in a Recession and Temporary Employment Subsidies when a Recovery is ExpectedLayoffs in a Recession and Temporary Employment Subsidies when a Recovery is Expected

Matthias Göcke ()

No 201029, MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung)

Abstract: Sunk firing costs shelter employment – and this effect is typically amplified by uncertainty due to an option value of waiting. Thus, if sunk firing costs are high, e.g. due to a employment protection legislation, and if recession related losses are with a high probability expected to be only transitory and not permanent, a relatively small employment subsidy will be sufficient to avoid layoffs by firms operating with current losses. Depending on the size of sunk hiring costs cyclical layoffs or even permanent job destruction can be avoided by short run subsidies during the beginning of a recession.

Keywords: recession; employment; sunk firing costs; uncertainty; employment subsidy (search for similar items in EconPapers)
JEL-codes: D81 J63 J68 (search for similar items in EconPapers)
Pages: 10 pages
Date: 2010
New Economics Papers: this item is included in nep-lab
References: View complete reference list from CitEc
Citations:

Forthcoming in

Downloads: (external link)
https://www.uni-marburg.de/en/fb02/research-groups ... s/29-2010_goecke.pdf First version, 2010 (application/pdf)

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:mar:magkse:201029

Access Statistics for this paper

More papers in MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) Contact information at EDIRC.
Bibliographic data for series maintained by Bernd Hayo ().