published as 'Playing Hard to Get: Theory and Evidence on Layoffs, Recalls, and Unemployment' in: Research in Labor Economics, 2013, 38, 211 - 258
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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