and the trend rate of productivity growth is small, a rise in firing costs affects mainly the hiring decision. Thus there … growth is large, firing costs affect mainly the firing decision. Then, as a result, average employment is increased. Our … first two decades following World War II - when large supply shocks were absent and the average rate of growth was high …

Macroeconomic shocks and labour-market institutions jointly determine employment growth and economic performance. The … environment: when the level of macroeconomic activity is expected to drop and/or the trend rate of productivity growth is small, a … periods of high growth and positive shocks. Our hypothesis is supported by empirical results using OECD data. …