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Layoffs and Lemons

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  • Gibbons, Robert
  • Katz, Lawrence F.

Abstract

We provide theoretical and empirical analyses of an asymmetric-information model of layoffs. When firms have discretion with respect to whom to lay off, the market infers that laid-off workers are of low ability. Assuming that no such negative inference is warranted if workers are displaced in a plant closing, postdisplacement wages should be lower and postdisplacement unemployment spells should be longer for those displaced by layoffs than for those displaced by plant closings, but predisplacement wages should not differ by cause of displacement. Evidence on displaced workers from Current Population Surveys supports all three of our model's predictions.

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Bibliographic Info

Paper provided by Harvard University Department of Economics in its series Scholarly Articles with number 3442782.

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Date of creation: 1991
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Publication status: Published in Journal of Labor Economics
Handle: RePEc:hrv:faseco:3442782

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  1. Milgrom, Paul & Oster, Sharon, 1987. "Job Discrimination, Market Forces, and the Invisibility Hypothesis," The Quarterly Journal of Economics, MIT Press, vol. 102(3), pages 453-76, August.
  2. Gibbons, R. & Katz, L.F., 1989. "Layoffs And Lemons," Working papers 531, Massachusetts Institute of Technology (MIT), Department of Economics.
  3. Michael Waldman, 1983. "Job Assignments, Signalling nad Efficiency," UCLA Economics Working Papers 286, UCLA Department of Economics.
  4. Andrew Caplin & Barry Nalebuff, 1990. "Aggregation and Social Choice: A Mean Voter Theorem," Cowles Foundation Discussion Papers 938, Cowles Foundation for Research in Economics, Yale University.
  5. Lawrence F. Katz & Bruce D. Meyer, 1991. "Unemployment Insurance, Recall Expectations, And Unemployment Outcomes," NBER Working Papers 2594, National Bureau of Economic Research, Inc.
  6. Edward P. Lazear, 1984. "Raids and Offermatching," NBER Working Papers 1419, National Bureau of Economic Research, Inc.
  7. Kletzer, L., 1988. "Returns To Seniority After Permanent Job Loss," Department of Economics Working Papers 129, Department of Economics, Williams College.
  8. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
  9. MacDonald, Glenn M, 1982. "A Market Equilibrium Theory of Job Assignment and Sequential Accumulation of Information," American Economic Review, American Economic Association, vol. 72(5), pages 1038-55, December.
  10. Riordan, Michael H & Staiger, Robert W, 1993. "Sectoral Shocks and Structural Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(3), pages 611-29, August.
  11. Lawrence F. Katz, 1986. "Layoffs, Recall and the Duration of Unemployment," NBER Working Papers 1825, National Bureau of Economic Research, Inc.
  12. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-90, October.
  13. Douglas L. Kruse, 1988. "International trade and the labor market experience of displaced workers," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 41(3), pages 402-417, April.
  14. Greenwald, Bruce C, 1986. "Adverse Selection in the Labour Market," Review of Economic Studies, Wiley Blackwell, vol. 53(3), pages 325-47, July.
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  1. Will Today's Unemployed Become Tommorow's Unemployable?
    by Catherine Rampell in Economix on 2010-12-02 15:34:00
  2. [??]???????????????????????
    by himaginary in himaginaryの日記 on 2010-12-15 08:00:00
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