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Mass layoffs and unemployment

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  • Caplin, Andrew
  • Leahy, John

Abstract

Mass layoffs give rise to groups of unemployed workers who possess similar characteristics and therefore may learn from one another's experience searching for a new job. Two factors lead them to be too selective in the job offers that they accept. The first is an information externality: searchers fail to take into account the value of their experience to others. The second is an incentive to free ride: each worker would like others to experiment and reveal information concerning productive jobs. Together these forces imply that in equilibrium the natural rate of unemployment is too high.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 46 (2000)
Issue (Month): 1 (August)
Pages: 121-142

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Handle: RePEc:eee:moneco:v:46:y:2000:i:1:p:121-142

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Web page: http://www.elsevier.com/locate/inca/505566

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References

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  1. Daron Acemoglu & Robert Shimer, 1999. "Efficient Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 107(5), pages 893-928, October.
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  14. Grossman, Sanford J & Stiglitz, Joseph E, 1980. "On the Impossibility of Informationally Efficient Markets," American Economic Review, American Economic Association, vol. 70(3), pages 393-408, June.
  15. Andrew Caplin & John Leahy, 1994. "Mass Layoffs and Unemployment," NBER Working Papers 4766, National Bureau of Economic Research, Inc.
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  27. repec:fth:coluec:602 is not listed on IDEAS
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Cited by:
  1. Katharine G. Abraham & Robert Shimer, 2001. "Changes in Unemployment Duration and Labor Force Attachment," NBER Working Papers 8513, National Bureau of Economic Research, Inc.
  2. Andrew Caplin & John Leahy, 1994. "Mass Layoffs and Unemployment," NBER Working Papers 4766, National Bureau of Economic Research, Inc.

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