Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/20245
Authors: 
Rodríguez-Planas, Núria
Year of Publication: 
2004
Series/Report no.: 
IZA Discussion paper series 1010
Abstract: 
Temporary layoffs are an important feature of the United States labor market. If these employer-employee relationships exist because of valuable job-matches, unemployment among high-productivity laid-off workers may be optimal from societal perspective. However, because of asymmetric information, low-productivity workers may behave strategically, and choose unemployment instead of low-wage jobs, resulting in an inefficient level of unemployment. This paper shows that in such cases, a re-employment bonus may give the correct incentives to laid-off workers and achieve the optimal equilibrium. The paper analyzes the equity properties of such a policy and its cost effectiveness. Finally, the model fits the data and offers several policy implications.
Subjects: 
temporary layoffs
recall expectations
unemployment
signalling and re-employment bonus demonstrations
JEL: 
J63
J65
J64
Document Type: 
Working Paper

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