Mass layoffs and unemployment

Andrew Caplin; John Leahy

doi:10.1016/S0304-3932(00)00014-3

Mass layoffs and unemployment

Andrew Caplin, John Leahy

Research output: Contribution to journal › Article › peer-review

Abstract

Mass layoffs give rise to groups of unemployed workers who possess similar characteristics and, therefore, may learn from one another's experience searching for a new job. Two factors lead them to exert too little effort in equilibrium. The first is an information externality: searchers fail to take into account the value of their experience to others. The second is an incentive to free ride: each worker would like others to experiment and reveal information concerning the location of productive jobs. Together these forces imply that in equilibrium the natural rate of unemployment is too high.

Original language	English (US)
Pages (from-to)	121-142
Number of pages	22
Journal	Journal of Monetary Economics
Volume	46
Issue number	1
DOIs	https://doi.org/10.1016/S0304-3932(00)00014-3
State	Published - Aug 2000

Keywords

E24
Information externality
J64
Natural rate of unemployment
Search

ASJC Scopus subject areas

Finance
Economics and Econometrics

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10.1016/S0304-3932(00)00014-3

Cite this

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abstract = "Mass layoffs give rise to groups of unemployed workers who possess similar characteristics and, therefore, may learn from one another's experience searching for a new job. Two factors lead them to exert too little effort in equilibrium. The first is an information externality: searchers fail to take into account the value of their experience to others. The second is an incentive to free ride: each worker would like others to experiment and reveal information concerning the location of productive jobs. Together these forces imply that in equilibrium the natural rate of unemployment is too high.",

keywords = "E24, Information externality, J64, Natural rate of unemployment, Search",

author = "Andrew Caplin and John Leahy",

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Mass layoffs and unemployment

Abstract

Keywords

ASJC Scopus subject areas

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