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Big shock, slow growth and the dynamics of aggregate labour demand with firing costs

Published online by Cambridge University Press:  17 August 2016

Marianne Chambin  and
Franck Portier
Marianne Chambin
Affiliation:
MAD-Paris I
Franck Portier
Affiliation:
CEPREMAP-MAD-University of Rouen
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Summary

This paper studies the dynamic properties of the labour demand model with non convex adjustment costs proposed by Bentolila and Bertola [1990]. With this model we evaluate the importance of the firing costs, following a great shock, for the dynamics of adjustment of the aggregated labour demand of a stationary state to an other. The model is calibrated on the French economy, and studies the transition following the shock of 1973-74,–i.e. a shock on the price of oil as well as the transition from a rapid and stable growth to a slow and uncertain one. We show that in this case, a drastic reduction of the firing costs when the shock occurs does not allow to modify substantially the path of the economy.

Résumé

Résumé

Cet article étudie les propriétés dynamiques du modèle de demande de travail avec coûts d’ajustement non convexes proposé par Bentolila et Bertola [1990]. Nous évaluons avec ce modèle l’imortance des coûts de licenciement dans la dynamique d’ajustement de la demande de travail agrégée d’un état stationnaire à un autre, suite à un grand choc. Le modèle est étalonné sur l’économie française, et étudie la transition à la suite du choc de 1973-74, –i.e. un choc sur le prix du pétrole ainsi que le passage d’une croissance rapide et peu variable à une croissance lente et incertaine. Nous montrons que dans ce cas, une réduction drastique des coûts de licenciement au moment du choc ne permet pas de modifier sensiblement la trajectoire de l’économie.

Keywords

J23E27J23E27
Type
Research Article
Information
Recherches Économiques de Louvain/ Louvain Economic Review , Volume 62 , Issue 3-4 , 1996 , pp. 357 - 375
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 1996 

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Footnotes

(*)

We thank without implications Jean-François Jacques, the participants at the CEPREMAP-Universitad Carlos III de Madrid-Université Catholique de Louvain SPES workshop, the MAD Université de Paris I workshop, the 1993 MAD international workshop on “Labor Market Dynamics and Aggregate Fluctuations” and three anonymous referees.

References

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