Firing Costs, Misallocation, and Aggregate Productivity / José-María Da-Rocha, Marina Mendes Tavares, Diego Restuccia.

Format:

Book

Author/Creator:

Da-Rocha, José-María.

Contributor:

National Bureau of Economic Research.

Mendes Tavares, Marina.

Restuccia, Diego.

Series:

Working Paper Series (National Bureau of Economic Research) no. w23008.

NBER working paper series no. w23008

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2016.

Summary:

We assess the quantitative impact of firing costs on aggregate total factor productivity (TFP) in a dynamic general-equilibrium framework where the distribution of establishment-level productivity is not invariant to the policy. Firing costs not only generate static factor misallocation, but also a worsening of the productivity distribution contributing to large aggregate TFP losses. Firing costs equivalent to 5 year's wages imply a drop in TFP of more than 20 percent. Factor misallocation accounts for 20 percent of the productivity loss, a relatively small drop in TFP, whereas the remaining 80 percent arises from the endogenous change in the productivity distribution.

Notes:

Print version record

December 2016.