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Layoffs And Lemons

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Author Info

  • GIBBONS, R.
  • KATZ, L.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 Massachusetts Institute of Technology (MIT), Department of Economics in its series Working papers with number 531.

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Length: 39 pages
Date of creation: 1989
Date of revision:
Handle: RePEc:mit:worpap:531

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Postal: MASSACHUSETTS INSTITUTE OF TECHNOLOGY (MIT), DEPARTMENT OF ECONOMICS, 50 MEMORIAL DRIVE CAMBRIDGE MASSACHUSETTS 02142 USA
Phone: (617) 253-3361
Fax: (617) 253-1330
Web page: http://econ-www.mit.edu/
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Postal: MASSACHUSETTS INSTITUTE OF TECHNOLOGY (MIT), DEPARTMENT OF ECONOMICS, 50 MEMORIAL DRIVE CAMBRIDGE MASSACHUSETTS 02142 USA
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Keywords: enterprises ; occupational mobility ; unemployment;

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References

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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.:
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  1. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
  2. Katharine G. Abraham & James L. Medoff, 1984. "Length of service and layoffs in union and nonunion work groups," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 38(1), pages 87-97, October.
  3. Gibbons, Robert & Katz, Lawrence F, 1991. "Layoffs and Lemons," Journal of Labor Economics, University of Chicago Press, vol. 9(4), pages 351-80, October.
  4. Paul R. Milgrom, 1984. "Job Discrimination, Market Forces and the Invisibility Hypothesis," Cowles Foundation Discussion Papers 708R, Cowles Foundation for Research in Economics, Yale University, revised 1985.
  5. 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.
  6. 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.
  7. Caplin, Andrew & Nalebuff, Barry, 1991. "Aggregation and Social Choice: A Mean Voter Theorem," Econometrica, Econometric Society, vol. 59(1), pages 1-23, January.
  8. Kletzer, L., 1988. "Returns To Seniority After Permanent Job Loss," Department of Economics Working Papers 129, Department of Economics, Williams College.
  9. Fudenberg, Drew & Tirole, Jean, 1991. "Perfect Bayesian equilibrium and sequential equilibrium," Journal of Economic Theory, Elsevier, vol. 53(2), pages 236-260, April.
  10. 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.
  11. 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.
  12. 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.
  13. Greenwald, Bruce C, 1986. "Adverse Selection in the Labour Market," Review of Economic Studies, Wiley Blackwell, vol. 53(3), pages 325-47, July.
  14. Michael Waldman, 1984. "Job Assignments, Signalling, and Efficiency," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 255-267, Summer.
  15. Lawrence F. Katz, 1986. "Layoffs, Recall and the Duration of Unemployment," NBER Working Papers 1825, National Bureau of Economic Research, Inc.
  16. Edward P. Lazear, 1984. "Raids and Offermatching," NBER Working Papers 1419, National Bureau of Economic Research, Inc.
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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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