General equilibrium analyses of layoff costs have had mixed messages on the implications for employment. This paper brings out the economic forces at work and explains the disparate results. Specifically, we show that positive employment effects of layoff costs come through reducing labor...

General equilibrium analyses of layoff costs have had mixed messages on the implications for employment. This paper brings out the economic forces at work and explains the disparate results. Specifically, we show that positive employment effects of layoff costs come through reducing labor...

We investigate the labor market effects of the reestablishment of private-sector workers' right to reinstatement for unfair dismissals, which occurred in 2002 in Peru. Using data from Peruvian Household Surveys from 2004 to 2015, and the Specialized Employment Survey 1998-2001, we estimate a...

We examine self-enforcing contracts between risk-averse workers and risk-neutral firms (the ‘invisible handshake') in a labor market with search frictions. Employers promise as much wage smoothing as they can, consistent with incentive conditions that ensure they will not renege during...

This paper explores, both theoretically and empirically, how firing costs affect worker productivity and turnover. We develop a model in which workers are essential to knowledge transfer between firms and worker effort is firm-specific in the sense that a worker can be fired before reaping the...

This paper proposes a new effect of firing costs on firms' behavior that builds from firms' demand for liquidity. When a time gap exists between production and its associated revenues, firing can become a liquidity adjustment tool that allows firms to increase their short-term liquidity. I refer...

This paper studies simple partial equilibrium models of dynamic labor demand, under certainty. Labor turnover costs may or may not decrease the firm's average labor demand, depending on the form of the revenue function, on the rates of discount and of labor attrition, and on the relative size of...