Signaling Effects of Layoffs in South Korea

Taehoon Kim

Hitotsubashi Journal of Economics, 2019, vol. 60, issue 2, 163-188

Abstract: I examine an asymmetric-information model of layoffs (Gibbons andKatz, 1991) by comparing changes in earnings of laid-off workers and displaced workers by plant closings using Korean data. The estimation result shows that laid-off male workers experience 11.5% greater earnings losses than those displaced by plant closings. Laid-off workers also have longer unemployment spells. Contrary to previous studies, the signaling effect of layoffs is observed not only in white-collar but also blue-collar occupations in South Korea. The seniority-based wage payment system and low unionization rate in South Korea are suggested as possible reasons for this unique finding.

Keywords: layoff; plant closing; signaling; union; seniority (search for similar items in EconPapers)
JEL-codes: J30 J31 J63 J64 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:hit:hitjec:v:60:y:2019:i:2:p:163-188

DOI: 10.15057/30889

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