Labour Market Information Acquisition and Downsizing
AbstractWe study the optimal mechanism for downsizing the public sector which takes into account different informational constraints (complete versus asymmetric information on each workers efficiency) and political constraints (mandatory versus voluntary downsizing). Under complete information, the optimal structure of downsizing (who is laid-off and who is not) does not depend on the political constraint and is determined by the (marginal) cost of retaining a worker in the public sector. Since this cost includes his opportunity cost in the private sector, information acquisition on opportunity costs affects the structure of downsizing. Under asymmetric information, the political constraints determine which workers obtain information rents and therefore affect the structure of downsizing. An increase in the precision of the information on workers' opportunity costs may increase or decrease social welfare depending on its impacts on the information rents.
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Bibliographic InfoPaper provided by Barcelona Graduate School of Economics in its series Working Papers with number 43.
Date of creation: Sep 2003
Date of revision:
Downsizing; Information Acquisition; Asymmetric Information; Blackwell's Theorem; Public Sector;
Other versions of this item:
- Doh-Shin Jeon & Jean-Jacques Laffont, 2006. "Labor Market Information Acquisition and Downsizing," Review of Development Economics, Wiley Blackwell, vol. 10(3), pages 347-366, 08.
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