Hiring and Dismissal Costs in Theory and Practice: A Comparison of Institutional Constraints and Employment Adjustment Patterns in Six OECD Countries.

This paper reports the results of a comparison of employment adjustment in Japan, the United States, and four major EC countries. Output and real wages are used in explaining the optimal employment level and change in employment. Short- and long-run responses to alterations of the exogenous variables are estimated and compared. Surprisingly Germany has quite rapid adjustment of labor while France and Italy show a much slower adjustment pattern. Even in comparison with the United States, Great Britain demonstrates the fastest adjustment to changes in the economic environment. By far the slowest adjustment pattern is realized in Japan. Copyright 1997 by WWZ and Helbing & Lichtenhahn Verlag AG