Scandinavian Working Papers in Economics

CAFO Working Papers,
Linnaeus University, Centre for Labour Market Policy Research (CAFO), School of Business and Economics

No 2006:4: A Note on the Shape of the Cost Function for Recruiting Labour

Jonas Månsson ()
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Jonas Månsson: Centre for Labour Market Policy Research (CAFO), Postal: Centre for Labour Market Policy Research (CAFO), Dept of Economics and Statistics, School of Management and Economics, Växjö University , SE 351 95 Växjö, Sweden

Abstract: The aim of this note is to derive, explore and discuss the shape of the recruitment, or hiring cost function. It is assumed that the recruitment cost can be divided into two components; direct costs and indirect costs. The direct cost captures cost directly associated with recruitment, such as e.g. advertising, interviewing etc, while the indirect cost capture di¤erences in marginal productivity due to recruitment. By making assumptions about the learning process I am able to present a cost function for recruitment that is static and dependent on number of persons that are to be recruited. I will argue that the shape of the recruitment cost, i.e. convexity or concavity, depends on the type of job. If the job/s o¤ered is/are standard low skilled type of jobs one can argue that the cost function for recruitment is concave, at least for small number of recruit- ment's. However, if the job requires a high degree of firms specific competence the recruitment cost function is more likely to be convex.

Keywords: Labour market: recruitment; hiring costs

JEL-codes: J24

12 pages, January 11, 2006

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