Displacement, Asymmetric Information and Heterogeneous Human Capital
(REVISED, June 2010)
In a seminal paper Gibbons and Katz (1991; GK) develop and empirically test an asymmetric information model of the labor market. The model predicts that wage losses following displacement should be larger for layoffs than for plant closings, which was borne out by data from the Displaced Workers Survey (DWS). In this paper, the authors take advantage of many more years of DWS data to examine how the difference in wage losses across plant closing and layoff varies with race and gender. They find that the differences between white males and the other groups are striking and complex.