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Layoff Costs and Efficiency with Asymmetric Information


Alain Delacroix


University of Quebec at Montreal (UQAM)

Etienne Wasmer


Observatoire Français des Conjonctures Economiques (OFCE); Sciences Po; Institute for the Study of Labor (IZA); Centre for Economic Policy Research (CEPR)

IZA Discussion Paper No. 4524

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.

Number of Pages in PDF File: 12

Keywords: bargaining, asymmetric information, employment protection legislation, inefficient job separations

JEL Classification: J41, J60

working papers series


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Date posted: November 9, 2009  

Suggested Citation

Delacroix, Alain and Wasmer, Etienne, Layoff Costs and Efficiency with Asymmetric Information. IZA Discussion Paper No. 4524. Available at SSRN: http://ssrn.com/abstract=1501940

Contact Information

Alain Delacroix
University of Quebec at Montreal (UQAM) ( email )
PB 8888 Station DownTown
Succursale Centre Ville
Montreal, Quebec H3C3P8
Canada
Etienne Wasmer
Observatoire Français des Conjonctures Economiques (OFCE) ( email )
69 Quai d'Orsay
Paris 75004
France
Sciences Po
56 rue Jacob
Paris Cedex 07, 75337
France
Institute for the Study of Labor (IZA)
P.O. Box 7240
Bonn, D-53072
Germany
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
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