Layoff Costs and Efficiency with Asymmetric Information
Wage determination under asymmetric information generates ine¢ ciencies due to excess turnover. Severance pay and layo¤ taxes can improve e¢ ciency. We show that inefficient separations can even be fully removed with xed separation taxes in the case where therelevant private information is exponentially distributed.
|Date of creation:||04 Sep 2009|
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