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Signaling in The Labor Market: New Evidence On Layoffs, and Plant Closings

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  • Nuria Rodriguez-Planas

Abstract

In my asymmetric -information model of layoffs, high-productivity workers are more likely to be recalled to their former employer and may choose to remain unemployed rather than to accept a low-wage job. In this case, unemployment can serve as a signal of productivity, and duration of unemployment may be positively related to post-laid-off wages even among workers who are not recalled. In contrast, because workers whose plant closed cannot be recalled, longer unemployment for them should not have a positive signaling benefit. Analysis of the data from the January 1988-2000 Displaced Workers Supplements to the Current Population Survey reveals that the wage/unemployment duration relation differs between laid-off workers and workers displaced through plant closings in the predicted way, and finds evidence consistent with asymmetric information in the U.S. labor market.

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  • Nuria Rodriguez-Planas, 2003. "Signaling in The Labor Market: New Evidence On Layoffs, and Plant Closings," William Davidson Institute Working Papers Series 2003-610, William Davidson Institute at the University of Michigan.
    • Handle: RePEc:wdi:papers:2003-610
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    References listed on IDEAS

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    Cited by:

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    2. Rodríguez-Planas, Núria, 2004. "Re-Employment Bonuses in a Signalling Model of Temporary Layoffs," IZA Discussion Papers 1010, Institute of Labor Economics (IZA).

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    More about this item

    Keywords

    laid-off workers; signaling; unemployment; and wages;
    All these keywords.

    JEL classification:

    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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