Wesselbaum, Dennis - In: Journal of Economic Studies 41 (2014), pp. 721-736
general equilibrium Real Business Cycle model and introduces firing costs and severance payments. Labor market frictions are … volatility over the cycle and have stronger negative welfare effects. Severance payments have a lower volatility, reduce … unemployment, and reduce welfare by a smaller amount. Practical implications–Policy reforms should be aimed to use severance …