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The Welfare Effects of Mobility Restrictions

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  • Byeongju Jeong

    (CERGE-EI)

Abstract

Mobility restrictions (e.g., severance payment, life-long tenure, and divorce ban) are widely observed. I present a partnership model that highlights the 'break-up externality' (i.e., the negative effect of a person's break-up decision on his current partner). Under this externality, there is too much searching for new partners and too much breaking-up of existing partnerships. Restrictions such as a break-up payment and break-up ban can reduce the levels of searching and breaking-up and improve welfare. Thus the paper rationalizes mobility restrictions as welfare-improving arrangements. (Copyright: Elsevier)

Suggested Citation

  • Byeongju Jeong, 2003. "The Welfare Effects of Mobility Restrictions," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(3), pages 685-696, July.
  • Handle: RePEc:red:issued:v:6:y:2003:i:3:p:685-696
    DOI: 10.1016/S1094-2025(03)00015-2
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    References listed on IDEAS

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    1. S. Rao Aiyagari & Jeremy Greenwood & Nezih Guner, 2000. "On the State of the Union," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 213-244, April.
    2. Fernando Alvarez & Marcelo Veracierto, 2000. "Labor-Market Policies in an Equilibrium Search Model," NBER Chapters,in: NBER Macroeconomics Annual 1999, Volume 14, pages 265-316 National Bureau of Economic Research, Inc.
    3. Ken Burdett & Randall Wright, 1998. "Two-Sided Search with Nontransferable Utility," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(1), pages 220-245, January.
    4. Burdett, Kenneth & Coles, Melvyn G, 1999. "Long-Term Partnership Formation: Marriage and Employment," Economic Journal, Royal Economic Society, vol. 109(456), pages 307-334, June.
    5. Burdett, K. & Coles, M. G., 1998. "Separation cycles," Journal of Economic Dynamics and Control, Elsevier, vol. 22(7), pages 1069-1090, May.
    6. Burdett Kenneth & Imai Ryoichi & Wright Randall, 2004. "Unstable Relationships," The B.E. Journal of Macroeconomics, De Gruyter, vol. 1(1), pages 1-44, January.
    7. Pissarides, Christopher A, 1984. "Search Intensity, Job Advertising, and Efficiency," Journal of Labor Economics, University of Chicago Press, vol. 2(1), pages 128-143, January.
    8. Hopenhayn, Hugo & Rogerson, Richard, 1993. "Job Turnover and Policy Evaluation: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 101(5), pages 915-938, October.
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    Citations

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    Cited by:

    1. Herman Z Bennett, 2007. "Labor’s Liquidity Service and Firing Costs," IMF Working Papers 07/120, International Monetary Fund.
    2. Steiner, Jakub, 2008. "Coordination of mobile labor," Journal of Economic Theory, Elsevier, vol. 139(1), pages 25-46, March.
    3. Bennett, Herman Z., 2011. "Labor's liquidity service and firing costs," Labour Economics, Elsevier, vol. 18(1), pages 102-110, January.

    More about this item

    Keywords

    mobility restriction; partnership; search; break-up;

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General

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