Ljungqvist, Lars () (Dept. of Economics, Stockholm School of Economics)
Abstract
General equilibrium analyses of layoff costs have had mixed messages on the implications for employment. This paper brings out the economic forces at work in different frameworks and explains the disparate results. Since private agents perceive layoff costs as equivalent to a less productive technology, these costs tend to have negative employment effects in models with employment lotteries where the number of employed can be reduced at a low cost to individual agents because of the collective sharing of aggregate consumption. In search models where agents are left to fend for themselves, layoff costs have the opposite tendency of lowering unemployment when such costs reduce the amount of labor reallocation. Lower frictional unemployment is thus attained at the cost of a less efficient labor allocation. Matching models have this very same tendency under the assumption that layoff costs do not alter the relative split of the match surplus between firms and workers. In contrast, if layoff costs increase workers' relative share of the surplus, matching models tend to post sharp increases in unemployment in response to layoff costs.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Length: 29 pages Date of creation: 05 Aug 1999 Date of revision: Handle: RePEc:hhs:hastef:0322
Contact details of provider: Postal: The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden Phone: +46-(0)8-736 90 00 Fax: +46-(0)8-31 01 57 Email: Web page: http://www.hhs.se/ More information through EDIRC
For technical questions regarding this item, or to correct its listing, contact: (Helena Lundin).
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.: