DP14845 Seven Facts about Temporary Layoffs

Author(s): Arash Nekoei, Andrea Weber
Publication Date: June 2020
Date Revised: June 2020
Keyword(s): Classical Unemployment
JEL(s):
Programme Areas: Labour Economics, Public Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=14845

We establish seven facts about temporary layoffs (TL), whose employers communicated an anticipated recall date at layoff: (1) The higher the current TL share at firm/industry-level, the higher (lower) the future recall (layoff) likelihood for both temporary and permanent layoffs (employees); (2) TL is more prevalent in: the upper-middle part of the wage distribution, (3-4) in mass layoffs and recessions; (5) The later the communicated recall date, the lower the accepted new-job wage, unconditional and conditional on non-employment duration; (6) TLs' new-job hazard rate (wage) jumps (drops) when recall likelihood falls; (7) Extending unemployment benefits increases separations in recall-intense sectors.