Employment fluctuations in a dynamic model with long-term and short-term contracts

Matsue, Toyoki (2019): Employment fluctuations in a dynamic model with long-term and short-term contracts.

Abstract

Fluctuations in employment are one of the central issues in the labor market literature and have been investigated in a number of empirical and theoretical studies. This study presents a dynamic labor demand framework in which long-term and short-term contracts coexist, and analyzes the employment fluctuations to a temporary productivity shock. The differences between long-term and short-term contracts are stickiness of employment adjustments and explicit employment duration. This study shows that the fluctuations in short-term employment are more volatile than that of long-term employment. Moreover, it indicates that the large adjustment cost brings about the decreasing in employment fluctuations. The adjustment cost plays a role in smoothing the employment fluctuations, which is consistent with the result in a standard dynamic labor demand model. In addition, this study shows that the high quit rate leads to the high variations in long-term and short-term employment to the shock, and results in large employment fluctuations.

• Item Type: MPRA Paper
• Language: English
• Keywords: employment dynamics; dynamic labor demand; labor market institutions; adjustment cost; employment duration
• Subjects: D - Microeconomics > D9 - Intertemporal Choice > D90 - General; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E24 - Employment ; Unemployment ; Wages ; Intergenerational Income Distribution ; Aggregate Human Capital ; Aggregate Labor Productivity; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J23 - Labor Demand; J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J32 - Nonwage Labor Costs and Benefits ; Retirement Plans ; Private Pensions; J - Labor and Demographic Economics > J4 - Particular Labor Markets > J41 - Labor Contracts

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