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I suppose that it doesn't cost most firms much to get rid of cheap labor, and that high wage workers typically have contracts that imply high compensations in case of firing.

But what about the remainder? Since Macroeconomics is mostly about the art of writing linear models, what evidence is there for average firing costs from the view point of the firm?

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  • $\begingroup$ Do you want dollar estimates or would you settle for cross-country proxies of labor market frictions? $\endgroup$ – BKay Feb 24 '15 at 15:02
  • $\begingroup$ @BKay I guess the latter can be interpreted as many different things. I also specifically want compensation or "punishment for firing", not "We lost/fired an employee and now we need to find a new one, which is costly". $\endgroup$ – FooBar Feb 24 '15 at 15:06
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    $\begingroup$ A little outdated, but related: management-issues.com/news/5337/… $\endgroup$ – Ubiquitous Feb 24 '15 at 16:36
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Interestingly I could not locate quantitative data on Firing Costs (aka Separation Costs aka Severance Pay) for the US Economy. Perhaps because, as US Dpt of Labor says

There is no requirement in the Fair Labor Standards Act (FLSA) for severance pay. Severance pay is a matter of agreement between an employer and an employee (or the employee's representative).

A world map and another one for separation costs measured in weeks of wages -but none of the two include data on US Economy.

ILO's new data base does not seem to have quantitative data on Firing Costs.

Kugler, A. D., & Saint Paul, G. (2000). Hiring and firing costs, adverse selection and long-term unemployment. deal with some US data but qualitatively and indirectly.

Abowd, J. M., & Kramarz, F. (2003). The costs of hiring and separations. Labour Economics, 10(5), 499-530. Data from the economy of France, related to year 1992. Extensive treatment of various costs associated with labor, including costs of separation treated distinctly. Note: monetary values are in French Francs. Conversion Rate: 1 FFr = 0.152449 EUR.

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