Nickell (1978), Bentolila and Bertola (1990) and Bertola (1990) analyse firms’ dynamic behaviour in the presence of positive firing costs, showing that the optimal strategy for firms is to reduce both hiring and firing, with an ambiguous effect on average employment over the business cycle. Regardless, stricter employment protection implies a slower speed of adjustment of employment towards its equilibrium level (Blanchard and Wolfers, 2000). Labour market equilibrium models such as Garibaldi (1998) and Mortensen and Pissarides (1999) come to similar conclusions about job mobility being negatively affected by EPL.