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Layoffs and lemons over the business cycle

  • Nakamura, Emi

This paper develops a simple model in which unemployment arises from a combination of selection and bad luck. During recessions, the proportion of workers who are laid off due to low productivity declines during recessions, diminishing the adverse signaling effect of an unemployment spell. Wage regressions estimated using the Displaced Workers Supplement support this basic prediction of the model.

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File URL: http://www.sciencedirect.com/science/article/B6V84-4NWCD7Y-3/1/6f0d19bb201c860b592b4d4fdfae6215
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Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 99 (2008)
Issue (Month): 1 (April)
Pages: 55-58

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Handle: RePEc:eee:ecolet:v:99:y:2008:i:1:p:55-58
Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

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  1. Rodriguez-Planas, N., 1998. "Playing Hard to Get: Theory and Evidence on Layoffs, Recalls and Unemployment," Papers 86, Boston University - Industry Studies Programme.
  2. Harry Krashinsky, 2002. "Evidence on adverse selection and establishment size in the labor market," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 56(1), pages 84-96, October.
  3. Gray, Jo Anna, 1976. "Wage indexation: A macroeconomic approach," Journal of Monetary Economics, Elsevier, vol. 2(2), pages 221-235, April.
  4. Robert Gibbons & Lawrence Katz, 1989. "Layoffs and Lemons," Working Papers 629, Princeton University, Department of Economics, Industrial Relations Section..
  5. Laing, Derek, 1994. "Involuntary Layoffs in a Model with Asymmetric Information Concerning Worker Ability," Review of Economic Studies, Wiley Blackwell, vol. 61(2), pages 375-92, April.
  6. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
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