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Layoffs, Lemons and Temps / Christopher L. House, Jing Zhang.
- Format:
- Book
- Author/Creator:
- House, Christopher L.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w17962.
- NBER working paper series no. w17962
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2012.
- Summary:
- We develop a dynamic equilibrium model of labor demand with adverse selection. Firms learn the quality of newly hired workers after a period of employment. Adverse selection makes it costly to hire new workers and to release productive workers. As a result, firms hoard labor and under-react to labor demand shocks. The adverse selection problem also creates a market for temporary workers. In equilibrium, firms hire a buffer stock of permanent workers and respond to changing business conditions by varying their temp workers. A hiring subsidy or tax can improve welfare by discouraging firms from hoarding too many productive workers.
- Notes:
- Print version record
- March 2012.
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