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Layoff Costs and Efficiency with Asymmetric Information

Author

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  • Delacroix, Alain

    (University of Québec at Montréal)

  • Wasmer, Etienne

    (Sciences Po, Paris)

Abstract

Wage determination under asymmetric information generates inefficiencies due to excess turnover. Severance pay and layoff taxes can improve efficiency. We show that inefficient separations can even be fully removed with fixed separation taxes in the case where the relevant private information is exponentially distributed.

Suggested Citation

  • Delacroix, Alain & Wasmer, Etienne, 2009. "Layoff Costs and Efficiency with Asymmetric Information," IZA Discussion Papers 4524, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp4524
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    References listed on IDEAS

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    Cited by:

    1. Stupnytska, Yuliia, 2015. "Asymmetric information in a search model with social contacts," Center for Mathematical Economics Working Papers 548, Center for Mathematical Economics, Bielefeld University.

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    More about this item

    Keywords

    bargaining; asymmetric information; employment protection legislation; inefficient job separations;
    All these keywords.

    JEL classification:

    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General

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