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Displacement, Asymmetric Information, and HeterogeneousHuman Capital

  • Luojia Hu
  • Christopher Taber

Gibbons and Katz's asymmetric information model of the labormarket predicts that wage losses following displacement should belarger for layoffs than for plant closings. This was borne out intheir empirical work. In this article, we examine how the differencein wage losses across plant closing and layoff varies with race andgender. We find that the basic prediction by Gibbons and Katz holdsonly for white males. We augment their asymmetric information modelwith heterogeneous human capital and show that this augmented modelcan match the data. (c) 2011 by The University of Chicago. Allrights reserved..

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Article provided by University of Chicago Press in its journal Journal of Labor Economics.

Volume (Year): 29 (2011)
Issue (Month): 1 (01)
Pages: 113-152

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Handle: RePEc:ucp:jlabec:v:29:y:2010:i:1:p:113-152
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  1. Joseph G. Altonji & Charles R. Pierret, 1997. "Employer learning and statistical discrimination," Working Paper Series, Macroeconomic Issues WP-97-11, Federal Reserve Bank of Chicago.
  2. Burdett, Kenneth & Mortensen, Dale T, 1998. "Wage Differentials, Employer Size, and Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 257-73, May.
  3. Robert Gibbons & Lawrence Katz, 1989. "Layoffs and Lemons," Working Papers 629, Princeton University, Department of Economics, Industrial Relations Section..
  4. Song, Younghwan, 2007. "Recall bias in the displaced workers survey: Are layoffs really lemons?," Labour Economics, Elsevier, vol. 14(3), pages 335-345, June.
  5. 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 165-88, January.
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  8. Joseph G. Altonji & Rebecca M. Blank, . "Race and Gender in the Labor Market," IPR working papers 98-18, Institute for Policy Resarch at Northwestern University.
  9. Coate, Stephen & Loury, Glenn C, 1993. "Will Affirmative-Action Policies Eliminate Negative Stereotypes?," American Economic Review, American Economic Association, vol. 83(5), pages 1220-40, December.
  10. Laing, D., 1990. "Involuntary Layoffs in a Model with Asymmetry Information Concerning Worker Ability," Papers 12-90-4, Pennsylvania State - Department of Economics.
  11. Harry Krashinsky, 2002. "Evidence on Adverse Selection and Establishment Size in the Labor Market," ILR Review, Cornell University, ILR School, vol. 56(1), pages 84-96, October.
  12. Lundberg, Shelly J & Startz, Richard, 1983. "Private Discrimination and Social Intervention in Competitive Labor Markets," American Economic Review, American Economic Association, vol. 73(3), pages 340-47, June.
  13. Phelps, Edmund S, 1972. "The Statistical Theory of Racism and Sexism," American Economic Review, American Economic Association, vol. 62(4), pages 659-61, September.
  14. Dennis J. Aigner & Glen G. Cain, 1977. "Statistical theories of discrimination in labor markets," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 30(2), pages 175-187, January.
  15. Becker, Gary S., 1971. "The Economics of Discrimination," University of Chicago Press Economics Books, University of Chicago Press, edition 2, number 9780226041162, May.
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