Firing Costs and Business Cycle Fluctuations
33 Pages Posted: 11 Feb 2004
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Firing Costs and Business Cycle Fluctuations
Firing Costs and Business Cycle Fluctuations
Date Written: December 2003
Abstract
This paper evaluates to what extent the introduction of firing costs can affect the aggregate dynamics of a neoclassical growth model with heterogeneous establishments. Similarly to the previous literature, firing costs are found to have large steady-state effects. However, they have no important effects on business cycle dynamics: Aggregate employment fluctuations are somewhat smaller when the firing costs are introduced, but most of the effects turn out to be insignificant.
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