Re-Employment Bonuses in a Signalling Model of Temporary Layoffs

Arbeitspapier

Temporary layoffs are an important feature of the United States labor market. If these employer-employee relationships exist because of valuable job-matches, unemployment among high-productivity laid-off workers may be optimal from societal perspective. However, because of asymmetric information, low-productivity workers may behave strategically, and choose unemployment instead of low-wage jobs, resulting in an inefficient level of unemployment. This paper shows that in such cases, a re-employment bonus may give the correct incentives to laid-off workers and achieve the optimal equilibrium. The paper analyzes the equity properties of such a policy and its cost effectiveness. Finally, the model fits the data and offers several policy implications.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 1010

Classification and Topics

• Classification: Wirtschaft ; Labor Turnover; Vacancies; Layoffs ; Unemployment Insurance; Severance Pay; Plant Closings ; Unemployment: Models, Duration, Incidence, and Job Search
• Subject: temporary layoffs ; recall expectations ; unemployment ; signalling and re-employment bonus demonstrations ; Friktionelle Arbeitslosigkeit ; Arbeitsproduktivität ; Signalling ; Arbeitsmarktpolitik ; Arbeitsuche ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Rodríguez-Planas, Núria
• Event: Veröffentlichung
• (who): Institute for the Study of Labor (IZA)
• (where): Bonn
• (when): 2004

Further information

• Handle: http://hdl.handle.net/10419/20245
• Last update: 10.03.2025, 11:43 AM CET