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Re-Employment Bonuses in a Signalling Model of Temporary Layoffs

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Author Info

  • Rodríguez-Planas, Núria

    ()
    (Queens College, CUNY)

Abstract

Temporary layoffs are an important feature of the United States labor market. If these employer-employee relationships exist because of valuable job-matches, unemployment among high-productivity laid-off workers may be optimal from societal perspective. However, because of asymmetric information, low-productivity workers may behave strategically, and choose unemployment instead of low-wage jobs, resulting in an inefficient level of unemployment. This paper shows that in such cases, a re-employment bonus may give the correct incentives to laid-off workers and achieve the optimal equilibrium. The paper analyzes the equity properties of such a policy and its cost effectiveness. Finally, the model fits the data and offers several policy implications.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1010.

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Length: 18 pages
Date of creation: Feb 2004
Date of revision:
Publication status: published as "A signaling model of temporary layoffs" in: Oxford Economic Papers, 2009, 61 (3), 566-585
Handle: RePEc:iza:izadps:dp1010

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Related research

Keywords: signalling and re-employment bonus demonstrations; temporary layoffs; recall expectations; unemployment;

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References

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  1. Ching-to Albert Ma & Andrew M. Weiss, 1990. "A Signaling Theory of Unemployment," NBER Working Papers 3565, National Bureau of Economic Research, Inc.
  2. Rodríguez-Planas, Núria, 2004. "Signaling in the Labor Market: New Evidence on Layoffs and Plant Closings," IZA Discussion Papers 1009, Institute for the Study of Labor (IZA).
  3. Bruce D. Meyer, 1995. "Lessons from the U.S. Unemployment Insurance Experiments," Journal of Economic Literature, American Economic Association, vol. 33(1), pages 91-131, March.
  4. Lawrence F. Katz, 1986. "Layoffs, Recall and the Duration of Unemployment," NBER Working Papers 1825, National Bureau of Economic Research, Inc.
  5. Gibbons, Robert & Katz, Lawrence F, 1991. "Layoffs and Lemons," Journal of Labor Economics, University of Chicago Press, vol. 9(4), pages 351-80, October.
  6. Stephen A. Woodbury & Robert G. Spiegelman, . "Bonuses to Workers and Employers to Reduce unemployment: Randomized Trials in Illinois," Upjohn Working Papers and Journal Articles sawrgs1987, W.E. Upjohn Institute for Employment Research.
  7. Carl Davidson & Stephen A. Woodbury, 1996. "Unemployment Insurance and Unemployment Implications of the Reemployment Bonus Experiments," Book chapters authored by Upjohn Institute researchers, in: Advisory Council on Unemployment Compensation: Background Papers, volume 3, pages KK1-KK37 W.E. Upjohn Institute for Employment Research.
  8. Katz, Lawrence F & Meyer, Bruce D, 1990. "Unemployment Insurance, Recall Expectations, and Unemployment Outcomes," The Quarterly Journal of Economics, MIT Press, vol. 105(4), pages 973-1002, November.
  9. Paul T. Decker & Christopher J. O'Leary., 1991. "An Analysis of Pooled Evidence From the Pennsylvania and Washington Reemployment Bonus Demonstrations," Mathematica Policy Research Reports 1134, Mathematica Policy Research.
  10. Meyer, Bruce D, 1996. "What Have We Learned from the Illinois Reemployment Bonus Experiment?," Journal of Labor Economics, University of Chicago Press, vol. 14(1), pages 26-51, January.
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Cited by:
  1. Schmelzer, Paul, 2011. "Unemployment and occupational mobility at the beginning of employment career in Germany and the UK," IAB Discussion Paper 201125, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].

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