constraints bind, with risky wages for workers and a risk premium that employers must pay. Mandatory firing costs can help, by … making it easier for employers to promise credibly not to cut wages in low-profitability periods. We show that firing costs …

This paper proposes a new effect of firing costs on firms' behavior that builds from firms' demand for liquidity. When … firing costs reduces the value of labor's liquidity service, which affects firms' demand for liquidity, and thus, firms …' demand for inputs. In addition to this negative effect at the creation margin, I also show that firing costs imply relatively …

We study the design of optimal monetary policy in a New Keynesian model with labor turnover costs in which wages are … zero and the optimal volatility of inflation is an increasing function of firing costs. The optimal rule should react to …

worker chooses the optimal level of firing costs by maximizing her human capital. Performing a comparative statics exercise …, we analyze the effects of labor market tightness on the optimal choice of firing costs. Our theoretical model shows the …

This article provides theoretical and empirical analyses of a firing costs model with adverse selection. Our theory … suggests that, as firing costs increase, firms increasingly prefer hiring employed workers, who are less likely to be lemons …. Estimates of re-employment probabilities from the National Longitudinal Survey of Youth support this prediction. Unjust-dismissal …

This paper uses a Shapiro-Stiglitz efficiency wage model to analyse the effects of firing costs on wages, employment …, expected utility and profits. It considers that the probability of a non-shirker being fired depends on an exogenous shock … conclusions derive from the finding that a greater probability of keeping one's job, because of higher firing costs, raises the …