Strong hysteresis due to age effects

Yu-Fu Chen, Gylfi Zoega

    Research output: Working paperDiscussion paper

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    Abstract

    Strong hysteresis in the labour market (see Cross, 1995) requires workers to be heterogeneous in terms of the cost of hiring and firing. We show how such heterogeneity arises naturally in labour markets due to differences in workers’ age by showing that both the hiring and the firing thresholds for productivity are age dependent. The presence of strong hysteresis does not for this reason depend on ad-hoc differences in the cost of hiring and firing workers.
    Original languageEnglish
    PublisherUniversity of Dundee
    Publication statusPublished - 2010

    Publication series

    NameDundee Discussion Papers in Economics
    PublisherUniversity of Dundee
    No.230
    ISSN (Print)1473-236X

    Keywords

    • Hysteresis
    • Hiring and firing costs
    • Heterogeneous workers

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  • Cite this

    Chen, Y-F., & Zoega, G. (2010). Strong hysteresis due to age effects. (Dundee Discussion Papers in Economics; No. 230). University of Dundee.