Firing Costs, Employment Fluctuations and Average Employment: An Examination of Germany / Jennifer Hunt.

By:

Hunt, Jennifer

Contributor(s):

National Bureau of Economic Research

Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w4825.Publication details: Cambridge, Mass. National Bureau of Economic Research 1994.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: West Germany's Employment Promotion Act of 1985 facilitated the use of fixed term contracts and increased the number of dismissals above which the employer is required to establish a 'social plan' (involving severance payments). The effect of this reduction in 'firing costs' on movements in employment is assessed using manufacturing data by detailed industry for the period 1977-1992: a dynamic specification using the data as a panel, and allowing coefficients to vary by industry (random coefficients) is employed. Compared to the 1977-1981 period, adjustment of blue collar hours was more flexible from 1982-1988, and less flexible in the subsequent period. There is weaker evidence that adjustment of blue collar workers became less flexible in the years following the new legislation and that white collar workers' flexibility fluctuated over the period examined. The timing and direction of these changes, as well as the direction of relative changes in flexibility between industries with high and low sales variability, suggest they are not the result of the Employment Promotion Act.

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August 1994.

West Germany's Employment Promotion Act of 1985 facilitated the use of fixed term contracts and increased the number of dismissals above which the employer is required to establish a 'social plan' (involving severance payments). The effect of this reduction in 'firing costs' on movements in employment is assessed using manufacturing data by detailed industry for the period 1977-1992: a dynamic specification using the data as a panel, and allowing coefficients to vary by industry (random coefficients) is employed. Compared to the 1977-1981 period, adjustment of blue collar hours was more flexible from 1982-1988, and less flexible in the subsequent period. There is weaker evidence that adjustment of blue collar workers became less flexible in the years following the new legislation and that white collar workers' flexibility fluctuated over the period examined. The timing and direction of these changes, as well as the direction of relative changes in flexibility between industries with high and low sales variability, suggest they are not the result of the Employment Promotion Act.