Labour demand in Germany: an assessment on non-wage labour

Yu-Fu Chen, Michael Funke

    Research output: Working paperDiscussion paper

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    The data indicate that non-wage labour costs in Germany have reached a record high in recent years. From 1972 to 2001, the ratio of non-wage labour costs to direct compensation in West German manufacturing industry rose from 55.6% to 81.2%. The topic of non-wage labour costs is increasingly being discussed among and between the political parties because non-wage labour costs are likely to have major negative effects on employment. We follow the real options approach, which allows us to investigate the value to a firm of waiting to adjust labour when the firm´s revenues are stochastic and adjustment costs are sunk. Simulation exercises show that the interaction between hiring and firing costs, non-wage labour costs and uncertainty can have important ramifications for employment dynamics.
    Original languageEnglish
    PublisherUniversity of Dundee
    Publication statusPublished - 2003

    Publication series

    NameDundee Discussion Papers in Economics
    PublisherUniversity of Dundee
    ISSN (Print)1473-236X


    • Real options
    • Labour demand
    • Non-wage labour costs
    • Hiring and firing costs
    • Germany

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