Strong Hysteresis due to Age Effects

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.

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Year of publication:	2010
Authors:	Chen, Yu-Fu ; Zoega, Gylfi
Institutions:	Scottish Institute for Research in Economics (SIRE)
Subject:	Hysteresis \| hiring and firing costs \| heterogeneous workers

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Series:	SIRE Discussion Papers.
Type of publication:	Book / Working Paper
Notes:	The text is part of a series SIRE-DP-2010-09 Number 2010-09
Source:	RePEc - Research Papers in Economics

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