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Layoffs and lemons over the business cycle

Emi Nakamura ()

Economics Letters, 2008, vol. 99, issue 1, 55-58

Abstract: This paper develops a simple model in which unemployment arises from a combination of selection and bad luck. During recessions, the proportion of workers who are laid off due to low productivity declines during recessions, diminishing the adverse signaling effect of an unemployment spell. Wage regressions estimated using the Displaced Workers Supplement support this basic prediction of the model.

Date: 2008
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Handle: RePEc:eee:ecolet:v:99:y:2008:i:1:p:55-58