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Layoffs and lemons over the business cycle

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  • Nakamura, Emi

Abstract

This paper develops a simple model in which unemployment arises from a combination of selection and bad luck. During recessions, the proportion of workers who are laid off due to low productivity declines during recessions, diminishing the adverse signaling effect of an unemployment spell. Wage regressions estimated using the Displaced Workers Supplement support this basic prediction of the model.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 99 (2008)
Issue (Month): 1 (April)
Pages: 55-58

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Handle: RePEc:eee:ecolet:v:99:y:2008:i:1:p:55-58

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Web page: http://www.elsevier.com/locate/ecolet

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  1. Robert Gibbons & Lawrence Katz, 1989. "Layoffs and Lemons," NBER Working Papers 2968, National Bureau of Economic Research, Inc.
  2. Laing, D., 1990. "Involuntary Layoffs in a Model with Asymmetry Information Concerning Worker Ability," Papers 12-90-4, Pennsylvania State - Department of Economics.
  3. Harry Krashinsky, 2002. "Evidence on adverse selection and establishment size in the labor market," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 56(1), pages 84-96, October.
  4. Nuria Rodriguez-Planas, 1998. "Playing Hard to Get: Theory and Evidence on Layoffs, Recalls and Unemployment," Papers 0086, Boston University - Industry Studies Programme.
  5. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  6. Gray, Jo Anna, 1976. "Wage indexation: A macroeconomic approach," Journal of Monetary Economics, Elsevier, vol. 2(2), pages 221-235, April.
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Cited by:
  1. Stephen M. Kosovich, 2009. "How do firms interpret a job loss? Evidence from the National Longitudinal Survey of Youth," Economics Bulletin, AccessEcon, vol. 29(2), pages 1070-1086.
  2. Oliver Ruf, 2008. "Effects of Firm Size and Business Cycle on Earning Losses of Displaced Workers," IEW - Working Papers 366, Institute for Empirical Research in Economics - University of Zurich.
  3. Michèle A. Weynandt, 2014. "Selective Firing and Lemons," NRN working papers 2014-05, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria.

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