The purpose of this research is to develop an alternative interpretation of layoffs which is fully consistent with an efficient labor market. Specifically, this research will focus on theoretical and empirical work which analyzes quits and layoffs within a matching framework that interprets separations as the outcome of joint wealth- maximizing behavior. A dynamic representation will replace the assumption of a sequence of spot markets. This will carry over to the estimation of structural models of turnover and wage equation estimation in the presence of endogenous turnover. Other aspects of the project include analyses of (a) temporary layoff and recall, (b) the effect of subsidized unemployment insurance, and (3) the testable differences between the joint wealth-maximizing and rigid-wage models. $$$ The role for government intervention in firm-worker relationships depends on how efficiently the labor market operates when left to market forces. The existence of layoffs has been interpreted by some as evidence that the labor market does not operate efficiently in the allocation of labor and the mitigation of unemployment. This project develops an alternative interpretation of layoffs which may be fully consistent with an efficient labor market. Much of the project will focus on examining the evidence as to whether layoffs are in fact consistent with an efficiently operating labor market. Of possible policy relevance would be the estimated effect on the unemployment insurance system of reclassifying would be quits as layoffs to quality for benefits.
