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Signaling in the Labor Market: New Evidence on Layoffs and Plant Closings

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  • Rodríguez-Planas, Núria

    (Queens College, CUNY)

Abstract

In my asymmetric-information model of layoffs, high-productivity workers are more likely to be recalled to their former employer and may choose to remain unemployed rather than to accept a low-wage job. In this case, unemployment can serve as a signal of productivity, and duration of unemployment may be positively related to post-laid-off wages even among workers who are not recalled. In contrast, because workers whose plant closed cannot be recalled, longer unemployment for them should not have a positive signaling benefit. Analysis of the data from the January 1988-2000 Displaced Workers Supplements to the Current Population Survey reveals that the wage/unemployment duration relation differs between laid-off workers and workers displaced through plant closings in the predicted way, and finds evidence consistent with asymmetric information in the U.S. labor market.

Suggested Citation

  • Rodríguez-Planas, Núria, 2004. "Signaling in the Labor Market: New Evidence on Layoffs and Plant Closings," IZA Discussion Papers 1009, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp1009
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    References listed on IDEAS

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    Cited by:

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    More about this item

    Keywords

    unemployment; signaling; laid-off workers; wages;
    All these keywords.

    JEL classification:

    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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