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Layoff Orders and Occupational Mobility via Unemployment

Author

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  • Oskari Vahamaa

    (Department of Economics, University of Turku)

Abstract

This paper examines how a change in layoff order can affect the decomposition and the size of unemployment in an equilibrium model where workers make optimal occupational reallocation decisions. In a calibrated model, a policy that concentrates involuntary unemployment incidences to inexperienced workers decreases workers’ incentives to reallocate, compared to an equilibrium where everyone faces an identical unemployment risk, leading also to a decrease in aggregate unemployment. Moreover, given that the human capital depreciation during unemployment spells is strong, this policy change increases the market output and on average does not harm inexperienced workers.

Suggested Citation

  • Oskari Vahamaa, 2015. "Layoff Orders and Occupational Mobility via Unemployment," Discussion Papers 101, Aboa Centre for Economics.
  • Handle: RePEc:tkk:dpaper:dp101
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    File URL: http://ace-economics.fi/kuvat/dp101.pdf
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    More about this item

    Keywords

    Layoff order; Occupational Mobility; Unemployment;

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation

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