Signaling in the Labor Market: New Evidence on Layoffs and Plant Closings

61 Pages Posted: 4 Mar 2004

See all articles by Núria Rodríguez-Planas

Núria Rodríguez-Planas

City University New York (CUNY), Queens College; IZA Institute of Labor Economics

Date Written: February 2004

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.

Keywords: laid-off workers, signaling, unemployment, wages

JEL Classification: J60, J30

Suggested Citation

Rodriguez-Planas, Nuria, Signaling in the Labor Market: New Evidence on Layoffs and Plant Closings (February 2004). Available at SSRN: https://ssrn.com/abstract=504442

Nuria Rodriguez-Planas (Contact Author)

City University New York (CUNY), Queens College ( email )

65-30 Kissena Blvd
Flushing, NY 11367-1597
United States

HOME PAGE: http://https://sites.google.com/site/nuriarodriguezplanas/

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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