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The Value of Layoffs and Labor Market Conditions as Signals of Worker Quality

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  • Kosovich Stephen M

    ()

    (Stephen F Austin State University)

Empirical studies in the job displacement literature have found that workers face significant earnings losses on average when they are permanently displaced from jobs. Previous work also finds that the costliness of job loss varies widely and that some of this variation may result from the differences between layoffs and plant closings. Layoffs provide hiring firms worker specific information about productivity but plant closings do not. This paper extends the understanding of the costs of job loss by presenting a theoretical motivation that indicates that labor market conditions can influence the information contained in a layoff. The empirical results from the Displaced Worker Supplement support this model and suggest that when the local unemployment rate is high, less information is transmitted by a layoff concerning worker quality, for the sample of white-collar workers.

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Article provided by De Gruyter in its journal The B.E. Journal of Economic Analysis & Policy.

Volume (Year): 10 (2010)
Issue (Month): 1 (March)
Pages: 1-22

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Handle: RePEc:bpj:bejeap:v:10:y:2010:i:1:n:25
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  1. Ruhm, Christopher J, 1991. "Are Workers Permanently Scarred by Job Displacements?," American Economic Review, American Economic Association, vol. 81(1), pages 319-324, March.
  2. Lori G. Kletzer & Robert W. Fairlie, 2003. "The Long-Term Costs of Job Displacement for Young Adult Workers," ILR Review, Cornell University, ILR School, vol. 56(4), pages 682-698, July.
  3. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
  4. Grund, Christian, 1999. "Stigma effects of layoffs?: Evidence from German micro-data," Economics Letters, Elsevier, vol. 64(2), pages 241-247, August.
  5. George Akerlof, 1976. "The Economics of Caste and of the Rat Race and Other Woeful Tales," The Quarterly Journal of Economics, Oxford University Press, vol. 90(4), pages 599-617.
  6. Stevens, Ann Huff, 1997. "Persistent Effects of Job Displacement: The Importance of Multiple Job Losses," Journal of Labor Economics, University of Chicago Press, vol. 15(1), pages 165-188, January.
  7. Yolanda K. Kodrzycki, 1997. "Training programs for displaced workers: what do they accomplish?," New England Economic Review, Federal Reserve Bank of Boston, issue May, pages 39-57.
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