Displacement, Asymmetric Information And Heterogeneous Human Capital
Gibbons and Katz's (1991) asymmetric information model of the labor market predicts wage losses following displacement should be larger for layoffs than for plant closings. This was borne out in their empirical work. In this paper, the authors examine how the difference in wage losses across plant closing and layoff varies with race and gender. They and that the basic prediction by Gibbons and Katz only holds for white males. They augment their asymmetric information model with heterogeneous human capital and show that this augmented model can match the data.