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Signaling Effects of Layoffs in South Korea

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  • Kim, Taehoon

Abstract

I examine an asymmetric-information model of layoffs (Gibbons andKatz, 1991) by comparing changes in earnings of laid-off workers and displaced workers by plant closings using Korean data. The estimation result shows that laid-off male workers experience 11.5% greater earnings losses than those displaced by plant closings. Laid-off workers also have longer unemployment spells. Contrary to previous studies, the signaling effect of layoffs is observed not only in white-collar but also blue-collar occupations in South Korea. The seniority-based wage payment system and low unionization rate in South Korea are suggested as possible reasons for this unique finding.

Suggested Citation

  • Kim, Taehoon, 2019. "Signaling Effects of Layoffs in South Korea," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 60(2), pages 163-188, December.
    • Handle: RePEc:hit:hitjec:v:60:y:2019:i:2:p:163-188
    DOI: 10.15057/30889
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    References listed on IDEAS

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    More about this item

    Keywords

    layoff; plant closing; signaling; union; seniority;
    All these keywords.

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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