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Two Sided-Learning with Applications to Labour Turnover and Worker Displacement

  • Gerard A. Pfann


    (Maastricht University)

  • Daniel S. Hamermesh


    (University of Texas at Austin)

Wemake several extensions to the recent literature on job loss whilemodernizing the very early job-displacement literature. After constructing a dynamicmodel of two-sided learning between a firm and its workers, we estimate it using personnel data from Fokker Aircraft that cover the path of layoffs and quits through its bankruptcy in March 1996. We find that the firm learns about workers’ loyalty (demonstrating the role of information in repeated cooperative principal-agent relationships), while workers do not learn (consistent with earlier empirical results on American workers). The type of data that we use also generates information on the value of learning and on whether and how the characteristics of workers who remain until the firm’s death differ from those of all affected workers. It thus allows us to measure the increases in the firm’s value from learning about its workers’ behavior and to infer the extent of biases in estimating losses from displacement from samples restricted to displaced workers.

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Article provided by Justus-Liebig University Giessen, Department of Statistics and Economics in its journal Journal of Economics and Statistics.

Volume (Year): 228 (2008)
Issue (Month): 5+6 (December)
Pages: 423-445

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Handle: RePEc:jns:jbstat:v:228:y:2008:i:5-6:p:423-445
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  1. Kletzer, Lori Gladstein, 1989. "Returns to Seniority after Permanent Job Loss," American Economic Review, American Economic Association, vol. 79(3), pages 536-43, June.
  2. Patrick Francois & Joanne Roberts, 2000. "Contracting Productivity Growth," Working Papers jorob-99-02, University of Toronto, Department of Economics.
  3. Bruce C. Fallick, 1995. "A review of the recent empirical literature on displaced workers," Finance and Economics Discussion Series 95-14, Board of Governors of the Federal Reserve System (U.S.).
  4. Henry S. Farber & Robert Gibbons, 1994. "Learning and Wage Dynamics," Working Papers 707, Princeton University, Department of Economics, Industrial Relations Section..
  5. James Heckman & Hidehiko Ichimura & Jeffrey Smith & Petra Todd, 1998. "Characterizing Selection Bias Using Experimental Data," NBER Working Papers 6699, National Bureau of Economic Research, Inc.
  6. repec:tpr:qjecon:v:107:y:1992:i:2:p:439-79 is not listed on IDEAS
  7. Joseph G. Altonji & Charles R. Pierret, . "Employer Learning and Statistical Discrimination," IPR working papers 97-18, Institute for Policy Resarch at Northwestern University.
  8. Radner, Roy, 1981. "Monitoring Cooperative Agreements in a Repeated Principal-Agent Relationship," Econometrica, Econometric Society, vol. 49(5), pages 1127-48, September.
  9. Pfann, Gerard A., 2001. "Options to quit," Economics Letters, Elsevier, vol. 70(2), pages 259-265, February.
  10. repec:tpr:qjecon:v:102:y:1987:i:1:p:51-75 is not listed on IDEAS
  11. Felli, Leonardo & Harris, Christopher, 1996. "Learning, Wage Dynamics, and Firm-Specific Human Capital," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 838-68, August.
  12. Pfann, Gerald A. & Verspagen, Bart, 1989. "The structure of adjustment costs for labour in the Dutch manufacturing sector," Economics Letters, Elsevier, vol. 29(4), pages 365-371.
  13. Hogan, Chad, 2001. "Enforcement of Implicit Employment Contracts through Unionization," Journal of Labor Economics, University of Chicago Press, vol. 19(1), pages 171-95, January.
  14. Hamermesh, Daniel S, 1989. "Labor Demand and the Structure of Adjustment Costs," American Economic Review, American Economic Association, vol. 79(4), pages 674-89, September.
  15. McLaughlin, Kenneth J, 1991. "A Theory of Quits and Layoffs with Efficient Turnover," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 1-29, February.
  16. Burda, Michael C. & Mertens, Antje, 2001. "Estimating wage losses of displaced workers in Germany," Labour Economics, Elsevier, vol. 8(1), pages 15-41, January.
  17. Daniel S. Hamermesh, 1984. "The Costs of Worker Displacement," NBER Working Papers 1495, National Bureau of Economic Research, Inc.
  18. Gerard A. Pfann, 2006. "Downsizing and Heterogeneous Firing Costs," The Review of Economics and Statistics, MIT Press, vol. 88(1), pages 158-170, February.
  19. Robert H. Topel & Michael P. Ward, 1988. "Job Mobility and the Careers of Young Men," NBER Working Papers 2649, National Bureau of Economic Research, Inc.
  20. Stiglitz, Joseph E & Weiss, Andrew, 1983. "Incentive Effects of Terminations: Applications to the Credit and Labor Markets," American Economic Review, American Economic Association, vol. 73(5), pages 912-27, December.
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