Hiring, Firing, and Relocation under Employment Protection

55 Pages Posted: 30 Oct 2014 Last revised: 2 Apr 2015

Min Dai

National University of Singapore (NUS) - Department of Mathematics

Jussi Keppo

National University of Singapore - NUS Business School

Tim A Maull

University of Michigan at Ann Arbor - Department of Industrial and Operations Engineering

Date Written: April 2, 2015

Abstract

We analyze how hiring and firing costs as well as firing regulatory delays affect firms' hiring, firing, and relocation policy with a stochastic control model. These frictions are substantial; e.g., the firing delay can be almost a year. In the model hiring and firing costs depend on the firm size and the number of people hired or fired. Based on our simulations, hiring and firing elasticities without relocation are highest with respect to demand and productivity volatility and the hiring and firing variable costs. The elasticity of firing due to relocation is highest with respect to the firm-sized firing cost.

Keywords: Labor market frictions, job reallocation, stochastic control

JEL Classification: C61, D21, J63, L51

Suggested Citation

Dai, Min and Keppo, Jussi and Maull, Tim A, Hiring, Firing, and Relocation under Employment Protection (April 2, 2015). Available at SSRN: https://ssrn.com/abstract=2516642 or http://dx.doi.org/10.2139/ssrn.2516642

Min Dai

National University of Singapore (NUS) - Department of Mathematics ( email )

Singapore

Jussi Keppo (Contact Author)

National University of Singapore - NUS Business School ( email )

1 Business Link
Singapore, 117592
Singapore

Tim A Maull

University of Michigan at Ann Arbor - Department of Industrial and Operations Engineering ( email )

1205 Beal Avenue
Ann Arbor, MI 48109
United States

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