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Firing Costs, Employment Fluctuations and Average Employment: An Examination of Germany
Author(s) -
Hunt Jennifer
Publication year - 2000
Publication title -
economica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.532
H-Index - 65
eISSN - 1468-0335
pISSN - 0013-0427
DOI - 10.1111/1468-0335.00203
Subject(s) - severance , labour economics , payment , flexibility (engineering) , work (physics) , economics , west germany , promotion (chess) , business , finance , engineering , mechanical engineering , management , politics , political science , law , economic history
West Germany's Employment Promotion Act of 1985 facilitated the use of fixed‐term contracts and increased the number of dismissals above which the employer is required to establish a ‘social plan’ (involving severance payments). I assess the effect of this reduction in ‘firing costs’ on movements in employment, using monthly data on a panel of detailed manufacturing industries for 1977‐92. I also examine the effect of introducing flexible hours of work in certain industries beginning in 1985. I find that employment adjustment was unaffected by the lower firing costs, but slowed by the greater working hours flexibility.