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Layoffs and lemons over the business cycle

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  • Nakamura, Emi

Abstract

This paper develops a simple model in which unemployment arises from a combination of selection and bad luck. During recessions, the proportion of workers who are laid off due to low productivity declines during recessions, diminishing the adverse signaling effect of an unemployment spell. Wage regressions estimated using the Displaced Workers Supplement support this basic prediction of the model.

Suggested Citation

  • Nakamura, Emi, 2008. "Layoffs and lemons over the business cycle," Economics Letters, Elsevier, vol. 99(1), pages 55-58, April.
    • Handle: RePEc:eee:ecolet:v:99:y:2008:i:1:p:55-58
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    References listed on IDEAS

    as
    1. Gibbons, Robert & Katz, Lawrence F, 1991. "Layoffs and Lemons," Journal of Labor Economics, University of Chicago Press, vol. 9(4), pages 351-380, October.
    2. Gray, Jo Anna, 1976. "Wage indexation: A macroeconomic approach," Journal of Monetary Economics, Elsevier, vol. 2(2), pages 221-235, April.
    3. Derek Laing, 1994. "Involuntary Layoffs in a Model with Asymmetric Information Concerning Worker Ability," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 61(2), pages 375-392.
    4. Núria Rodríguez-Planas, 2014. "Playing Hard to Get: Theory and Evidence on Layoffs, Recalls, and Unemployment," Research in Labor Economics, in: New Analyses of Worker Well-Being, volume 38, pages 211-258, Emerald Group Publishing Limited.
    5. Harry Krashinsky, 2002. "Evidence on Adverse Selection and Establishment Size in the Labor Market," ILR Review, Cornell University, ILR School, vol. 56(1), pages 84-96, October.
    6. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-444, June.
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    Cited by:

    1. Christopher L. House & Jing Zhang, 2012. "Layoffs, Lemons and Temps," NBER Working Papers 17962, National Bureau of Economic Research, Inc.
    2. Sushant Acharya & Shu Lin Wee, 2020. "Rational Inattention in Hiring Decisions," American Economic Journal: Macroeconomics, American Economic Association, vol. 12(1), pages 1-40, January.
    3. Oliver Ruf, 2008. "Effects of Firm Size and Business Cycle on Earning Losses of Displaced Workers," IEW - Working Papers 366, Institute for Empirical Research in Economics - University of Zurich.
    4. Richard Freeman, 2011. "New Roles for Unions and Collective Bargaining Post the Implosion of Wall Street Capitalism," Chapters, in: Susan Hayter (ed.), The Role of Collective Bargaining in the Global Economy, chapter 10, Edward Elgar Publishing.
    5. Gabriel P. Mathy, 2015. "Hysteresis and Persistent Long-Term Unemployment: Lessons from the Great Depression and World War II," Working Papers 2015-02, American University, Department of Economics.
    6. repec:hal:spmain:info:hdl:2441/qqo2oivo980taefakkgk0sv9m is not listed on IDEAS
    7. Stephen M. Kosovich, 2009. "How do firms interpret a job loss? Evidence from the National Longitudinal Survey of Youth," Economics Bulletin, AccessEcon, vol. 29(2), pages 1070-1086.
    8. Julien Pascal, 2020. "Search, matching and heterogeneity [Recherche, appariement et hétérogénéité]," SciencePo Working papers Main tel-03408394, HAL.
    9. Julien Pascal, 2020. "Search, matching and heterogeneity [Recherche, appariement et hétérogénéité]," SciencePo Working papers tel-03408394, HAL.
    10. repec:spo:wpmain:info:hdl:2441/qqo2oivo980taefakkgk0sv9m is not listed on IDEAS
    11. Gabriel P. Mathy, 2018. "Hysteresis and persistent long-term unemployment: the American Beveridge Curve of the Great Depression and World War II," Cliometrica, Springer;Cliometric Society (Association Francaise de Cliométrie), vol. 12(1), pages 127-152, January.
    12. Carlo Gianelle & Giuseppe Tattara, 2014. "Vacancy chains and the business cycle. Stringing together job-to-job transitions in micro data," International Journal of Manpower, Emerald Group Publishing Limited, vol. 35(8), pages 1212-1235, October.
    13. Michèle A. Weynandt, 2014. "Selective Firing and Lemons," NRN working papers 2014-05, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria.

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