Essays on Labor Market Frictions and Macroeconomic Welfare
Author | : Guanyi Yang |
Publisher | : |
Total Pages | : 108 |
Release | : 2018 |
ISBN-10 | : OCLC:1090798583 |
ISBN-13 | : |
Rating | : 4/5 ( Downloads) |
Download or read book Essays on Labor Market Frictions and Macroeconomic Welfare written by Guanyi Yang and published by . This book was released on 2018 with total page 108 pages. Available in PDF, EPUB and Kindle. Book excerpt: Chapter 2 studies frictions in firm's hiring and firing decisions in an environment with dual labor markets. More firms execute employment decisions in two labor markets: a permanent (regular) market with firing costs and a frictionless temporary labor market. This paper studies the employment response of firms to heightened idiosyncratic risk and firing rigidity. Rising firing rigidity in the regular market and heightened risks reduce employment and output, which creates large welfare loss. By introducing a temporary labor market, firms switch from regular employment to temporary employment and reduce total employment loss. Thus, temporary employment creates a buffer for firms' employment decisions and for the economy's welfare. However, it cannot fully compensate the efficiency cost from rising firing cost and risk.