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Why Are There Mobility Restrictions?

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  • Byeongju Jeong

Abstract

Mobility restrictions (e.g., severance payment, life-long tenure, and divorce ban) are widely observed. This paper is an attempt to understand why there are these restrictions. I present a model economy that features production teams and focuses on the search for partners and the formation and break-up of teams. Under no restrictions, there is too much searching and breaking-up because the individual decision problem ignores the loss of the deserted partner’s utility. Arrangements such as break-up payment and break-up ban can improve welfare. Thus the paper rationalizes mobility restrictions as welfare-improving arrangements.

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File URL: http://iweb.cerge-ei.cz/pdf/wp/Wp152.pdf
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Bibliographic Info

Paper provided by The Center for Economic Research and Graduate Education - Economic Institute, Prague in its series CERGE-EI Working Papers with number wp152.

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Date of creation: Sep 1999
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Handle: RePEc:cer:papers:wp152

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Keywords: Mobility restriction; production team; search; break-up.;

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