Abstract

http://ssrn.com/abstract=351394
 
 

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The Excess Sensitivity of Layoffs and Quits to Demand


Robert E. Hall


Stanford University - The Hoover Institution on War, Revolution and Peace; National Bureau of Economic Research (NBER)

Edward P. Lazear


Stanford Graduate School of Business; National Bureau of Economic Research (NBER); Institute for the Study of Labor (IZA)

November 1984

NBER Working Paper No. w0864

Abstract:     
Excessive layoffs in bad times and excessive quits in good times both stem from the same weakness in practical employment arrangements: the specific nature of worker-firm relations creates a situation of bilateral monopoly. Institutions which have arisen to avert the associated inefficiency cannot mimic the separation decisions of a perfect-information, first-best allocation rule. Simple employment rules based on predetermined or indexed wages are in many cases the most desirable among the class of feasible employment arrangements. More complicated contracts which seem to deal more effectively with turnover issues are either infeasible because of informational requirements or create adverse incentives on some other dimension.

Number of Pages in PDF File: 53

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Date posted: January 7, 2008  

Suggested Citation

Hall, Robert E. and Lazear, Edward P., The Excess Sensitivity of Layoffs and Quits to Demand (November 1984). NBER Working Paper No. w0864. Available at SSRN: http://ssrn.com/abstract=351394

Contact Information

Robert E. Hall (Contact Author)
Stanford University - The Hoover Institution on War, Revolution and Peace ( email )
Stanford, CA 94305-6010
United States
650-723-2215 (Phone)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
650-723-2215 (Phone)
Edward P. Lazear
Stanford Graduate School of Business ( email )
518 Memorial Way
Stanford, CA 94305-5015
United States
650-723-9136 (Phone)
650-723-0498 (Fax)

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Institute for the Study of Labor (IZA)
P.O. Box 7240
Bonn, D-53072
Germany
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