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Workers as Insurance: Anticipated Government Assistance and Factor Demand

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  • Hillman, Arye L
  • Katz, Eliakim
  • Rosenberg, Jacob

Abstract

This paper investigates the effect of anticipation of government assistance on factor demand when the likeliho od of intervention is perceived to increase with the numbers of worke rs laid off in the event of an adverse realization of product price. Workers thus serve, imperfectly, an insurance function for the firm. Internalization by firms of the political sensitivity of governments of unemployment results in more labor being employed and more output produced, although not necessarily by more labor-intensive methods. T he effect can be an implicit subsidy to capital. An adverse-selection effect on firms' locational choice is also identified. Copyright 1987 by Royal Economic Society.

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Bibliographic Info

Article provided by Oxford University Press in its journal Oxford Economic Papers.

Volume (Year): 39 (1987)
Issue (Month): 4 (December)
Pages: 813-20

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Handle: RePEc:oup:oxecpp:v:39:y:1987:i:4:p:813-20

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Cited by:
  1. Bruce Blonigen & Thomas Prusa, 2003. "The Cost of Antidumping: the Devil is in the Details," Journal of Economic Policy Reform, Taylor & Francis Journals, Taylor & Francis Journals, vol. 6(4), pages 233-245.
  2. Zuleta, Hernando & Villaveces, Marta Juanita & Andonova, Veneta, 2013. "Conflict and negotiation in Colombia: Are pre-donations useful?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, Elsevier, vol. 47(C), pages 105-117.
  3. Nelson, Douglas, 2006. "The political economy of antidumping: A survey," European Journal of Political Economy, Elsevier, Elsevier, vol. 22(3), pages 554-590, September.
  4. Herbert Bruecker & Philipp Schroder & Christian Weise, 2004. "Can EU Conditionality Remedy Soft Budget Constraints In Transition Countries?," Royal Economic Society Annual Conference 2004, Royal Economic Society 126, Royal Economic Society.
  5. Herbert Brücker & Philipp Schröder, 2007. "EU accession and the hardening of soft budget constraints: some macro evidence," Economic Change and Restructuring, Springer, Springer, vol. 40(3), pages 235-252, September.
  6. Mehrdad Vahabi, 2001. "The Soft Budget Constraint: A Theoretical Clarification," Post-Print, HAL hal-00629160, HAL.
  7. Alan Bevan & Saul Estrin & Mark E. Schaffer, 1999. "Determinants of Enterprise Performance during Transition," CERT Discussion Papers, Centre for Economic Reform and Transformation, Heriot Watt University 9903, Centre for Economic Reform and Transformation, Heriot Watt University.
  8. Forteza, Alvaro, 2001. "Multiple equilibria in government transfer policy," European Journal of Political Economy, Elsevier, Elsevier, vol. 17(3), pages 531-555, September.
  9. Mark E. Schaffer, 1997. "Do Firms in Transition Economies have Soft Budget Constraints? A Reconsideration of the Concepts and Evidence," CERT Discussion Papers, Centre for Economic Reform and Transformation, Heriot Watt University 9720, Centre for Economic Reform and Transformation, Heriot Watt University.

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