Why Are There Mobility Restrictions?
Mobility restrictions (e.g., severance payment, life-long tenure, and divorce ban) are widely observed. This paper is an attempt to understand why there are these restrictions. I present a model economy that features production teams and focuses on the search for partners and the formation and break-up of teams. Under no restrictions, there is too much searching and breaking-up because the individual decision problem ignores the loss of the deserted partner’s utility. Arrangements such as break-up payment and break-up ban can improve welfare. Thus the paper rationalizes mobility restrictions as welfare-improving arrangements.
When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpla:0012004. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA)
If references are entirely missing, you can add them using this form.