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Layoffs and Lemons

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  • Robert Gibbons
  • Lawrence Katz

Abstract

The authors 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 the model's predictions. Copyright 1991 by University of Chicago Press.

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Bibliographic Info

Paper provided by Princeton University, Department of Economics, Industrial Relations Section. in its series Working Papers with number 629.

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Date of creation: Apr 1989
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Handle: RePEc:pri:indrel:629

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Related research

Keywords: layoffs; unemployment; wages; asymmetric information; displaced workers;

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References

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  1. Greenwald, Bruce C, 1986. "Adverse Selection in the Labour Market," Review of Economic Studies, Wiley Blackwell, vol. 53(3), pages 325-47, July.
  2. 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.
  3. Caplin, A. & Nalebuff, B., 1989. "Aggregation And Social Choice: A Mean Voter Theorem," Discussion Papers 1989_31, Columbia University, Department of Economics.
  4. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January.
  5. 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.
  6. 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.
  7. Edward P. Lazear, 1984. "Raids and Offermatching," NBER Working Papers 1419, National Bureau of Economic Research, Inc.
  8. 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.
  9. Michael Waldman, 1983. "Job Assignments, Signalling nad Efficiency," UCLA Economics Working Papers 286, UCLA Department of Economics.
  10. Michael H. Riordan & Robert W. Staiger, 1988. "Sectoral Shocks and Structural Unemployment," NBER Working Papers 2522, National Bureau of Economic Research, Inc.
  11. Lawrence F. Katz, 1986. "Layoffs, Recall and the Duration of Unemployment," NBER Working Papers 1825, National Bureau of Economic Research, Inc.
  12. 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.
  13. Kletzer, L., 1988. "Returns To Seniority After Permanent Job Loss," Department of Economics Working Papers 129, Department of Economics, Williams College.
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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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