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Just-Cause Employment Policies in the Presence of Worker Adverse Selection


  • Levine, David I


The free market may not lead to the efficient level of just-cause employment protection if workers are heterogeneous. Any firm that switches to just cause will attract a disproportionate share of workers that provide low effort, yet are difficult to dismiss with cause. Thus, there is an externality concerning each firm's just-cause policy. If all firms had just-cause policies, then the efficiency gains of just cause might outweigh the burden of the undesirable workers. Nevertheless, no single firm may find it in its interest to switch to just cause. It is possible for laws that require just cause to increase efficiency. Copyright 1991 by University of Chicago Press.

Suggested Citation

  • Levine, David I, 1991. "Just-Cause Employment Policies in the Presence of Worker Adverse Selection," Journal of Labor Economics, University of Chicago Press, vol. 9(3), pages 294-305, July.
  • Handle: RePEc:ucp:jlabec:v:9:y:1991:i:3:p:294-305

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    References listed on IDEAS

    1. Becker, Gary S, 1974. "A Theory of Social Interactions," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1063-1093, Nov.-Dec..
    2. Chiswick, Barry R, 1978. "The Effect of Americanization on the Earnings of Foreign-born Men," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 897-921, October.
    3. Heckman, James J & Honore, Bo E, 1990. "The Empirical Content of the Roy Model," Econometrica, Econometric Society, vol. 58(5), pages 1121-1149, September.
    4. Sandell, Steven H, 1977. "Women and the Economics of Family Migration," The Review of Economics and Statistics, MIT Press, vol. 59(4), pages 406-414, November.
    5. Kenny, Lawrence W, 1983. "The Accumulation of Human Capital during Marriage by Males," Economic Inquiry, Western Economic Association International, vol. 21(2), pages 223-231, April.
    6. A. D. Roy, 1951. "Some Thoughts On The Distribution Of Earnings," Oxford Economic Papers, Oxford University Press, vol. 3(2), pages 135-146.
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