A note on firing costs and severance benefits in equilibrium unemployment

Article Abstract:

Firing rules and severence benefit effects on employees' and firms' equilibrium behavior is studied using a simple analytic model. Analysis indicates that the financial burden of severance benefits determines the effect of the firm on equilibrium unemployment. Lack of flexibity in firing is more significant for employment than the level of severance pay. The model also suggests that government subsidy of these benefits as observed in Japan and Sweden seem economically practicable.

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Contestability in a resource market with non-convex costs

Article Abstract:

A response to a paper that applied contestability theory to study exhaustible resource markets is presented. It disputes the assertions contained in the paper on the existence of market equilibrium. These include ultra-free market entry of firms, an assumption of a plateau-like average cost curve for each company and the Ramsey optimality of the equilibrium. A reply from the author is also discussed.

Competition (Economics), Nonrenewable natural resources, Nonrenewable resources

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Labor hoarding when unemployment is a worker discipline device

Article Abstract:

Labor hoarding by firms impacted by idiosyncratic demand shocks is examined using efficiency wage models. Such companies are shown to make labor force adjustments only when there is a substantial difference between the effective wage and the marginal value product of labor. Firms' voluntary use of severance pay programs is also considered utilizing the shirking model with idiosyncratic demand shocks.

Noncommercial research organizations, Models, Compensation management, Layoffs

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