This paper provides an explanation for the observed positive relationship between youth unemployment and the cost of firing workers. When the cost of firing workers is high, firms only fire when the present discounted value of future losses is high, in which case they gain little by postponing...

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...

The data indicate that non-wage labour costs in Germany have reached a record high in recent years. From 1972 to 2001, the ratio of non-wage labour costs to direct compensation in West German manufacturing industry rose from 55.6 per cent to 81.2 per cent. The topic of non-wage labour costs is...